Global Logistic Properties

Phillip Securities Research, Feb 17

CHINA GDP grew by 7.7 per cent in 2013, with a projected forecast of 7.5 per cent GDP growth in 2014. Despite the forecast slowing GDP growth, we are still positive on the resilient demand of modern logistics properties in China, driven by: (1) improving exports by developed countries in anticipation of a recovering global economy; (2) robust domestic consumption and improving region-centric logistics activities from inland developments.

Demand for modern logistics facilities in Japan continued to be strong, especially in the midst of a recovering Japan economy driven by Abenomics effects. Global Logistic Properties (GLP) recently has been stepping up its efforts on developing the Japan properties. In January 2014, GLP has revealed development start plans on three new projects in Greater Tokyo (GLP Yachiyo and GLP Sayama Hidako I and II) with a total development cost of 29.8 billion yen (S$368 million).

We believe there will be increase in the contribution from the Japan joint-controlled entities with the new completion and stabilisation of existing projects (GLP Atsugi, GLP MFLP Ichikawa Shiohama and GLP Asaye) and rising rentals in coming quarters. However, GLP's profits upside may be mitigated by possible further yen deprecation in the near term. Target price is at S$2.92.

NEUTRAL