Global Logistic Properties - CIMB Research 2017-08-08: Business As Usual

GLOBAL LOGISTIC PROP LIMITED MC0.SI

Global Logistic Properties - Business As Usual

GLP’s core EPS of 1.51 UScts for 1QFY3/18 was in line at 25% of our FY18 forecast and 23% of consensus.
China benefited from rental growth and active leasing activities.
Japan was affected by income vacuum from asset sales, the US continues to see strong leasing and rental uplift.

Rising fee income is underpinned by increasing AUM. The group is exploring options to grow in new and existing markets.
We maintain our Hold call with a higher TP of S$3.38.

GLP reported 1QFY3/18 net profit of US$144.2m, -29% yoy despite a 27% increase in revenue to US$261.8m. This is due to the impact of lower revaluation gains in the current period vs. a year ago. Excluding revaluations, earnings would have been US$71m (EPS: 1.51 UScts), +3% yoy.
The group leased/renewed 3.3m sqm of leases in 1Q with an average 72% retention ratio and rent renewal growth of 7.7%.
It also met 11%/15% of its development starts/completions targets as at end-1QFY18, largely in China.

China is still the main driver, up 21% yoy to US$38m and accounting for 44% of core earnings excluding revaluations.
Performance was underpinned by effective rent growth of 4.4% and renewing/leasing of 1.79m sqm in 1Q. However, portfolio occupancy fell 1% pt to 84% due to lower lease ratio of stabilisations.

Japan saw a 9% decline in core earnings excluding revaluations to US$41m due to income vacuum from disposal of properties to GLP J-REIT, partly offset by higher fund fees. It leased/renewed 0.23m sqm of space with an effective uplift of 6.8% in rents.
While Japan has not commenced nor completed any of its FY18 development targets as at 1QFY18, management indicated that these activities are likely to be back-end loaded and remain on track.

The US saw a 7% improvement in core earnings, thanks to 20.4% effective rental renewal uplift with 0.89m sqm of space leased/renewed.
Occupancy remained healthy at 94% with a retention rate of 78%. There was a 14bp compression in cap rates in 1Q.

Fund management income rose 15% yoy to US$48m, led by higher asset and property management fee. With 29% of its US$39bn AUM still uncalled, we anticipate contributions from this segment to continue growing going forward.
In addition, the group is also exploring options to expand in new and existing markets. Net debt to assets stands at 23.3% as at 1QFY18.

We leave our FY18-20 EPS estimates unchanged but lift our RNAV-based target price to S$3.38, in view of the privatisation offer on the table. The expected completion date is on or before 14 Apr 2018.
In the meantime, we believe that the share price would likely trade close to the offer price. Hence, we maintain our Hold call.
Downside risks to our call include not obtaining the required shareholder approval.
Upside risk is further cap rate compression and valuation uplift to GLP’s portfolio in various markets.

LOCK Mun Yee CIMB Research | http://research.itradecimb.com/ 2017-08-08

CIMB Research SGX Stock Analyst Report HOLD Maintain HOLD 3.38 Up 3.050