BUY S$1.995 STI : 3,088.42
Price Target : S$ 2.80
Reason for Report : Post POA conference notes
Potential Catalyst: New acquisitions, organic leasing growth
DBSV vs Consensus: Slightly below
• Leading logistics player with value add capabilities
• Strong execution track record to secure tenant stickiness
• If successful, potential acquisition in Japan under a fund structure could generate fee income and enhance ROE
• Maintain Buy, TP S$2.80 on parity to RNAV
Execution on track. Global Logistics Properties (GLP) participated in our POA conference last week with good investors’ responses. Attention was focused on operating environment in Japan (postearthquake) and China as well as the latest media report on the possible acquisition of Lasalle Investment Management's Japan logistics portfolio. Management provided an update in the two countries and highlighted its competitive advantage with a leading market position and reiterated its long-term strategy.
Capturing robust demand and providing value-add capability. In terms of operations, demand for its logistics space in China remains robust as consumption expenditure continues to be strong. In addition to the vast network, GLP’s development value-add capability makes it the preferred partner and secures tenant stickiness. Recent collaboration with China's largest online apparel retailer, Vancl, to address its rapid growth and logistics needs through site selection, project planning and logistics facility leasing on a nationwide basis is a case in point. Also, the strategic partnership with Unicharm, a Japan-based leading manufacturer of baby care, feminine care and healthcare products, to develop logistics facilities for its manufacturing bases in China and to start its built to suit development agreement with the project GLP Tianjin Xiqing Economic Development Area, highlights the group's multicapability edge. In Japan, the group confirmed that it had submitted a bid to acquire a portfolio of over 20 industrial distribution and warehousing properties owned by Lasalle Investment Management in Japan. If successful, GPL will acquire the portfolio in a fund structure with one or more institutional investors. This is in line with the group's strategy to establish its emerging Fund Management platform and generate fee income, which can be extremely ROE enhancing.
Maintain Buy. GLP offers investors exposure into the largest Asian logistics facilities pure play. We derive a RNAV of S$2.80 using a sum of parts analysis that captures the value of underlying assets as well as potential reinvestment opportunities from balance sheet capacity deployment. Our target price of S$2.80, pegged at parity to asset backing, offers 40% upside.
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