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Analysts: Invest In GLP For Over 20% Returns
Aspire, Hot Picks | 12 February 2015
By: Raymond Leung
Articles (142) Profile

Analysts updates of GLP

Last week, Global Logistic Properties (GLP) announced the group’s financial results for 3Q15. Revenue growth was minimal at 1 percent on a year-on-year (YoY) basis. Revenue grew to US$179 million while earnings took a hit with a 36 percent fall YoY to US$112 million.

However, the earnings and revenue are better after adjusting for the China investor consortium’s 33.8 percent stake in GLP China, sale of assets to GLP J-REIT, FX-related effects and material non-recurring items.

After taking these into consideration, revenue would have grown by 30 percent and earnings would have fallen by a slight 3 percent.

The growth is on the back of strong operational results from China and the expansion of its fund management platform. GLP’s properties in China continue to be well received by its tenants as they achieved higher rental reversions in the past year.

Unlocking Value Through Developments
New investors have been brought into the China business. This will strengthen the group’s capability in land sourcing and generate new business opportunities. Thus enabling GLP to unlock more value through development of properties in China that have brought in strong earnings.

First hand developments of properties in its essential markets are the key to earnings for GLP. High revaluation gains are earned on development completions along with development fees and promotions earned from capital partners’ share of development.

Gains from such revaluation are expected to accelerate as GLP ramps up its development pace. GLP has commenced a total of US$1.7 billion worth of new projects across China, Japan and Brazil. The group is projected to start another US$3.4 billion worth of projects in FY 2016.

Stronger Fund Management Platform
Fund management has increasingly become stronger and started contributing more towards GLP’s revenue. In 3Q15, the segment contributed US$31 million towards the group’s revenue, which is a 92 percent YoY growth.

The US$31 million comprises of property management fees of US$15 million and development fees of US$16 million.

As at 5th February 2015, GLP’s fund management platform has a total invested capital of US$8.2 billion with another US$4.1 billion of uncalled capital. This is poised to increase by another US$8.1 billion by the end of this year as GLP announced the acquisition of one of the largest logistics real estate portfolios in the US.

In total, GLP’s asset under management (AUM) is set to grow over US$20 billion.

Through the investment of the US logistics fund, GIC will become GLP’s largest single investor with a vested interest of $12 billion. This will add on to the credentials of GLP as a significant player in the logistics property fund company.

Seeking New Opportunities And Diversification

Source: GLP, NAV Breakdown as at 31st December 2014

From the initial formation of GLP with its roots in China and Japan, the group has expanded into various countries such as Brazil and US. The decision to acquire a US property portfolio will be an efficient way to be vested in quality properties and diversify its portfolio from China and Japan.

Is GLP Still Stable With Its Aggressive Expansion Plan?
As of 31st December 2014, GLP remains well capitalized with a cash hoard of US$400 million and low net debts to assets of 4 percent. With the strong balance sheet, analysts contend that GLP will remain stable and even have the ability to seek other investment opportunities.

Sentiments from the street remains strong with GLP as they unanimously gave the company “Buy” calls. GLP has a potential average upside of 21.12 percent as analysts are confident towards its growth.

Trained in fund management, Raymond is familiar with shares and various investment vehicles.

Please click here for more information about this author.

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