Global Logistic Properties - Fundamentals intact (DBSVickers)

BUY S$1.755 STI : 2,850.59

Price Target : S$ 2.80

Reason for Report : 1Q12 Results

Potential Catalyst: Organic growth and acquisitions

DBSV vs Consensus: Consensus EPS is marginally below ours

• Results in line, growth boosted by China

• Medium term prospects driven by organic and inorganic drivers

• Maintain Buy with S$2.80 TP

Good set of results. GLP reported a good set of results with revenue rising 15% y-o-y to US$129.1m, led by strong growth in China. Revenue for Japan, which accounted for 75% of topline, grew 4% y-o-y to US$97m but stripping out currency effect would have showed a 1.7% dip due to the disruption in operations following the earthquake. Occupancy remained at a high 99% and rents were stable. In China, revenue surged 69% y-o-y to US$32m (+60% in constant currency terms) boosted by a 5% hike in average portfolio rents. This was supported by strong monthly demand averaging 171,075sm during the quarter with major leases tied with Shunjie Logistics, Commercial Global, Amazon and VIPshop. Reported net profit fell 80% y-o-y to US$97.3m. Stripping out revaluation impact, it would have been 2.3% better at US$73.3m.

Driven by both organic and acquisition growth. Going forward, we expect GLP to continue demonstrating strong organic growth in China on the back of positive rental reversions and good take up with tenants looking for large spaces. Recent acquisitions of 49% share in Shanghai Yupei for US$53.6m and 90% stake in Vialog for US$60.2m would add to both completed portfolio and landbank. The group is also on track to complete 1.66msm of new space in China and has added another 210,879sm of new landbank to its China portfolio. This would provide further earnings visibility. In Japan, plans for a development fund are still intact. With a net debt/asset ratio of 0.22x, it is well placed to continue landbanking as it ramps up development activities.

Maintain Buy. We have raised our FY12 earnings to adjust for the impact of revaluation surplus taken in 1Q12. Our RNAV of S$2.80 is based on sum of parts that captures the value of its underlying assets as well as reinvestment potential from its balance sheet capacity. Maintain Buy with TP of S$2.80.