Global Logistic Properties - CIMB Research 2017-02-09: Improving performance

GLOBAL LOGISTIC PROP LIMITED MC0.SI

Global Logistic Properties - Improving performance

3Q/9MFY17 results were largely in line, with yoy core earnings growth coming from better rental uplift and organic portfolio expansion.
There was sustained leasing momentum in China in 3Q.
Japan and the US enjoys high occupancy, with positive rental uplift.
Management stated that strategic review of business is underway, although no deadline has been indicated.

GLP’s 3QFY17 results were within expectations, with revenue up 17% yoy to US$232.5m from improved performance across the board and higher fee income. Net profit of US$170.7m was -7.3% yoy, dragged by a S$53m forex loss and absence of one-off US fund syndication fee (in 3QFY16), partly offset by higher revaluation gains.
Excluding these exceptional items, core net profit would have been US$78m, +7% yoy.
As for 9M, core net profit came in at US$215m, making up 77% of our FY17 forecast.

In terms of operations, GLP renewed/leased 3.3m sq m of space in 3Q, with average rental uplift of 6.8% and retention ratio of 73%.
China portfolio occupancy was stable at 87%, while rents rose 5.3% from renewal with demand from the organised retail, auto parts and cold storage sectors.
As at end-3QFY17, GLP has met 71% of its FY17 development starts target and 58% of its completions target. The group is also looking at establishing a wholesale income fund for its completed properties in China in 2017.

GLP’s operations in Japan remained steady, with occupancy of 97% and effective rental renewal growth of 6.6%. The group has exceeded its completion targets for FY17F and recently secured a strategic land site to build GLP Sagamihara (US$1.1bn, 655,000sq m GFA). The first phase of construction is scheduled to start in 2020.
In the US, rent reversion continues to be strong, with a 14.4% uplift from renewal for 1m sq m of space in 3Q and sustained high occupancy level of 94%.

GLP is undertaking an independent strategic review of options for its business and has received various non-binding proposals from a number of parties. The Special Committee will be evaluating these proposals with the objective of enhancing shareholder value.
Management indicated there is no deadline for this exercise.

We lift FY17F EPS by 12% to factor in latest results. Our RNAV-based TP is raised slightly to S$2.79, as we update GLP J-REIT’s latest share price and refresh our US$/S$ exchange rate assumption.
After the recent share price hike, GLP is now trading at 1x P/BV and close to our TP. Hence, we downgrade to Hold.
We still like GLP for its leadership position in the modern logistics warehouse space and fund management business but think that its near-term share price performance will be affected by the strategic review outcome.
Risk to our call include a slower China market.

LOCK Mun Yee CIMB Research | YEO Zhi Bin CIMB Research | http://research.itradecimb.com/ 2017-02-09

CIMB Research SGX Stock Analyst Report HOLD Downgrade ADD 2.79 Up 2.730