BUY S$1.89 STI : 2,884.00
Price Target : S$ 2.80
• Buys 49% stake in Shanghai Yupei Group for US$53.6m
• Strengthening positioning and foothold in China
• Maintain Buy with TP $2.80
Strengthening foothold in China. GLP has entered into an agreement to buy 49% stake in Shanghai Yupei Group (SYG) from private equity fund Equity International for US$53.6m. SYG is one of the largest logistics developers in China with a completed portfolio of 11 buildings in 4 industrial parks totaling 0.25msm NLA in Shanghai (3), Suzhou (6) and Chuzhou (2) and a pipeline of 1.074msm GFA spread over Beijing, Shenyang, Wuhan, Guangzhou, Wuxi, Xiamen and Chengdu. GLP will also have 1 of the 5 board seats at SYG. In addition, GLP also has the option to acquire a further 1% stake in SYG as well as take a direct 70% share in 10 of the 11 completed assets. Should the option be exercised, the group will have an effective 85% stake in the underlying assets.
Strategic acquisition will deepen foothold and positioning in China. Although the actual impact on the transaction is difficult to quantify in the absence of more details, we see this deal as strategically positive for GLP. Besides consolidating its market share and positioning in China, the purchase will also provide a strong pipeline of development assets. This is GLP’s third acquisition since listing (bought stake in parent company of Blogis in Dec10 and stake in Airport City Devt in Jan11), which will strengthen its foothold in the modern logistics space in China, thus further extending the group’s leadership in the country. Besides being a strong testimonial to GLP’s business development capabilities, the transaction will also boost its pipeline visibility with a potential 1.074msm GFA landbank.
GLP’s share price has retraced in tandem with the market’s downturn and the stock is trading at a steep 33% discount to its sum of parts valuation of $2.80. Maintain Buy with target price of $2.80, pegged at parity to sum of parts valuation.
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