BUY S$1.67 STI : 2,885.26
Price Target : S$ 2.80
• JV with CPPIB to develop Japan logistics assets
• Creating a new source of recurring income
• Maintain Buy with TP S$2.80
New development JV fund with CPPIB. GLP has formed a JV with Canada Pension Plan Investment Board (CPPIB) to set up a development fund to develop and hold quality modern logistics facilities in Japan. The fund is structured as an open-fund with a long-term investment horizon. The equity commitment is US$500m of which each partner will put in US$250m over 3 years. Based on a target leverage of 50% after stabilization, AUM could be as high as US$1b. The fund will be GLP’s exclusive development vehicle in Japan and is also CPPIB’s first direct real estate investment in the country. It is intended to hold both multi-tenanted and BTS facilities in the greater Tokyo and Osaka areas.
Establising a new and recurring income source. The development fund is in line with management’s strategy to tap new opportunities amid the limited supply and strong demand for modern logistics facilities in Japan and where spread between market and yield on cost could be as high as 150-200bps. The first potential development site in Tokyo has been identified. With this vehicle, GLP will be able to generate asset management and development fees as well as potential incentive fees, in addition to development margins and property cashflows. The impact of this is likely to be felt in the medium term when the fund deploys its capital into new developments. Net gearing inclusive of $250m of equity is likely to rise marginally to 23.8% and the group remains well placed to further tap new opportunities with its strong balance sheet.
Maintain Buy. GLP remains a major player in the Asian modern logistics space with pole positions in China and Japan. Our RNAV of $2.80 is based on sum of parts that captures the value of underlying assets as well as reinvestment potential from its balance sheet capacity. Maintain Buy with TP of S$2.80.
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