Global Logistic Properties

Phillip Securities Research, May 26

THE positive operational performance is underpinned by buoyant leasing momentum with record- high new and expansion leases of three million sq m, up 74 per cent y-o-y in FY2014.

Fund management platform business also posted strong growth with management income doubled to US$25 million in this quarter. Global Logistic Properties (GLP) intends to accelerate the portfolio growth and target to commerce US$2.7 billion development starts in FY2015. A dividend of 4.5 cents was proposed.

We are seeing healthy leasing activities in all three markets in Q4 FY2014. In China, the new and expansion leases leaped by more than 100 per cent to one million sq m y-o-y this quarter (up 61 per cent y-o-y for the whole of FY2014), with 71 per cent leased to existing customers.

Out of the new leases, e-commerce and third-party logistics companies represented about 45 per cent and 23 per cent of the demand respectively, demonstrating the strong exigency from these industries. For Japan side, leasing activities for FY2014 increased by 57 per cent y-o-y, driven by a recovery in consumer spending.

Overall, Japan portfolio remained well-leased at 99 per cent. The development starts were 2.5 million sq m gross floor area (GFA) in China (in-line with target) and 453,000 sq m GFA in Japan (exceeding the development target) for FY2014. The above operating metrics signified the continued robust logistics demand in China and Japan ...

GLP intends to step up the portfolio growth with FY2015 target development starts expenditure at US$2.7 billion (US$1.7 billion for China, US$675 million for Japan and US$252 million for Brazil), an increase of 38 per cent y-o-y. We favour GLP for: 1) its dominant market position, 2) landlord-favoured market dynamics for modern logistics facilities, and 3) solid investors with strong financial capability. We upgrade our rating to "accumulate" as we roll over to new FY2015 target price of S$3.13 and introduce FY2016 estimates.

Potential risk: Depreciation of JPY/RMB, mitigating GLP's profits.

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