• Core PATMI up 22.5% YoY
• Near term oversupply in some CN cities
• Fund mgt continues growth

1QFY17 numbers in line

1QFY17 PATMI decreased 24.3% YoY to US$202.9m mostly due to lower contributions from associates/JVs, higher finance costs and lower fair value gains of investment properties, partially offset by higher non-operating income and lower tax expenses. Excluding revaluation and other one-time gains, core PATMI for the quarter is estimated at US$69.2m, which increased 22.5% YoY versus US$56.5m in 1QFY16.

In terms of the topline, 1QFY17 revenues rose 8.6% YoY to US$206.6m given the completion/stabilization and higher rents at development projects in China, higher management fee income from the inclusion of GLP US Income Partners II and the growth of development activities in Japan, which were partially offset by rent adjustments in China resulting from the transition of business tax to the VAT regime and the weakening of the RMB against the USD. Overall, we judge these results to be within expectations and 1QFY17 core PATMI constitutes 21.3% of our full year forecast.

Near term oversupply in some Chinese cities

In China, the group’s lease ratio eased 1% QoQ to 86% as at end June 2016, reflecting management’s guarded outlook last quarter that they are seeing near-term oversupply in some cities. The group is starting developments only in cities with strong demand and has has met 20% of its FY17 development starts so far (US$610m out of US$1.4b).

In Japan and the US, GLP continues to see strong leasing trends and positive portfolio performance, with sameproperty net property income up 2.1% and 7.2% in Japan and US, respectively. Fund management fees from the group’s fund management business rose 17% YoY to US$42m; GLP sees this as a valuable recurring source of income that can deliver growth consistently ahead and also highlights that the group’s fund management platform has US$12b of uncalled capital which can generate continued growth in fees ahead.

The group expects to continue leveraging its fund management platform to strategically expand its portfolio. Maintain BUY with an unchanged fair value estimate of S$2.37.  

Source: OCBC Research - 12 Aug 2016