After Global Logistic Properties reported second quarter income yesterday morning, Macquarie Equities Research (MER) released a research report on the same day maintaining its ‘Outperform’ rating and 12-month price target of $3.26 on Global Logistic Properties. The shares slipped 1.8% to close at $2.69 yesterday, 21.2% lower than MER’s price target. Excerpts from the research report released on Tuesday 4th November, can be found below..
 
Event
Before market open, Global Logistic Properties (GLP) reported 2QFY15 net income, excluding revaluation gains, of US$9m (-83%) year on year (YoY). However, that includes few one-offs (mainly FX related).
 
Stripping these out, 2QFY15 clean net income came in at US$59m (+22% YoY; -3% QoQ).
 
Impact
Result highlights. 2QFY15 revenue +32% YoY, boosted by new lease-up of development projects (810K sqm, +41% YoY) in China. Growth momentum remains strong in GLP’s three core markets:
 
China (48% of GLP’s portfolio valuation, as at Sep 14): Clean profit before tax (PBT) came in at US$37m (-14% QoQ, 2QFY14: undisclosed), due to dilution from consortium stake. Operating metrics remain healthy with rents, lease ratio and net property income (NPI) for stabilised assets relatively unchanged quarter on quarter (QoQ) at approx RMB1.02 /sqm/day, approx 90% and approx 75%. Same-property NPI up 6.5% YoY. Development starts on track to hit US$1.7bn in FY15 (1H15: US$846m).
 
Japan (36%): Leasing momentum continues to remain strong at 99% lease ratio. Stabilised assets’ rents and NPI margin stable at JPY1,150/sqm/mth and 87%.
 
Brazil (17%): 2Q15 development starts came in strong at US$53m (+212%) year on year (YoY). Same-property rent growth up 6.4% YoY.
 
Growing fund management business. Year to date, GLP expanded the fund management platform by US$2.5bn through i) formation of GLP Brazil Income Partners II (US$1.1bn), ii) Expansion of GLP Brazil Income Partners I and Japan Development Venture by US$0.4bn and US$0.5bn and iii) injection of US$0.5bn into GLP J-REIT. 2QFY15 fund management revenue came in at US$27m (+23% QoQ).
 
Price catalyst
12-month price target: S$3.26 based on a Sum of Parts methodology.
 
Catalyst: Faster pace of development starts in China; positive leasing momentum
 
MER’s action and recommendation
GLP offers a direct proxy to China’s (65% of NAV) growing logistics sector, which is well-supported by a rising urbanisation rate and resilient domestic consumption.

Source: Macquarie Research - 5 Nov 2014