Global Logistic Properties - CIMB Research 2016-09-13: Acquiring US$1.1bn portfolio in the US

GLOBAL LOGISTIC PROP LIMITED MC0.SI

Global Logistic Properties - Acquiring US$1.1bn portfolio in the US

GLP increases its exposure to the buoyant US logistics facilities market, with the acquisition of a US$1.1bn portfolio.
Management expects the US to make up a higher 8% of NAV post-acquisition.

We estimate that the transaction will generate ROE of 13% (inclusive of fees), marginally accretive to earnings
Maintain Add, with a slightly higher target price of S$2.73.

GLP has increased its exposure to the buoyant US logistics facilities market, with the proposed purchase of its third US portfolio, valued at US$1.1bn, from Hillwood Development Company. An initial US$700m is expected to be acquired in Dec 16.
GLP will be the asset manager and expects to retain a 10% stake post-syndication.
Following the purchase, GLP will be the second-largest owner and operator of logistics facilities in the US, with an expanded portfolio of 17m sq m, making up 8% of its total NAV.

The initial 1m sq m (US$700m) completed portfolio is young, with average age of three years, and is 100% leased with a weighted average lease expiry of nine years. The portfolio is spread over Chicago, Dallas and Atlanta (74% of leased area), with strong exposure to online retail, retail and F&B tenants.
Initial portfolio has in-place rent of US$4.19psf/year, translating into a going-in cap rate of 5.7%.
The remaining US$400m development portfolio will be acquired in phases upon completion and full lease up.

Management expects this transaction to be funded by equity (US$470m) and debt (US$635m). GLP’s 10% equity stake is likely to be funded by cash on hand and existing credit facilities. The group expects this transaction to generate an ROE of 13% (inclusive of fees), which would boost earnings marginally.

We maintain our Add rating and raise our RNAV slightly to S$2.73 post-transaction to factor in higher fee income and its 10% share of earnings contribution from this portfolio.
Our RNAV-based target price is also raised to S$2.73, based on parity to RNAV.
Downside risk include a greater than expected slowdown that could affect its operations in China.

LOCK Mun Yee CIMB Research | YEO Zhi Bin CIMB Research | http://research.itradecimb.com/ 2016-09-13

CIMB Research SGX Stock Analyst Report ADD Maintain ADD 2.730 Up 2.720