• 1QFY16 results in line
• Lower FY16 Chinese devt targets
• To acquire US$4.55b US portfolio

1QFY16 numbers in line but Chinese development targets moderated

1QFY16 PATMI increased 49.4% YoY to US$268.1m mostly due to development and FV gains at JVs and investment assets in China and Japan (cap rates compressed by 25bps and 11 bps, respectively). Overall, we judge this set of results to be within expectations, and estimated core PATMI now constitutes 28.7% of our full year forecast.

In China, 690k sqm of new leases were signed – up 29% YoY – and rent growth on renewal increased 7.3% YoY. That said, the lease ratio decreased 3% QoQ to 88% (group expects ~90% in FY16).

We highlight that GLP also moderated its Chinese FY16 development targets (starts from US$2.2b to US$1.6b; completions from US$1.4b to US$1.1b). Operation traction in Japan and Brazil appear firm (60k sqm and 82k sqm of new leases in Japan and Brazil, respectively, with rent growth on renewals in the mid-single digits.)

To acquire US$4.55b logistics portfolio in the US

GLP also recently announced that it would acquire a US$4.55b US logistics portfolio from Industrial Income Trust. The portfolio was 93% leased as at end Jun15 with a weighted average lease expiry of 5.5 years, and will enlarge GLP’s US footprint by 50% to 173m sq ft to become the 2nd largest logistics property operator in the US.

The group would initially own 100% of the portfolio upon closing in Nov15 and subsequently pare down its stake to 10% by Apr16. We understand that syndication demand from major institutional investors is expected to be strong. The portfolio will be acquired at a cap rate of 5.6%, and the group’s initial equity commitment of US$1.9b will be funded by cash on hand and existing credit facilities.

Management has indicated that they expect to generate compelling returns, including share of operating results and fund management fees, on its target 10% equity stake of US$190m within the first year of investment. Maintain BUY with an unchanged fair value estimate of S$3.07.

Source: OCBC Research - 31 Jul 2015