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GLP Gunning For Market Dominance in Logistics Space
Tradeable, Tradeable Ideas | 16 June 2014
By: Elaine Lee
Articles (11) Profile
  1. Global Logistics Properties (GLP) is set for a stronger quarter ahead as they gear up for expansion plans with strong leasing trends.
  2. With strategic partnerships, GLP is paving its way to market dominance in China’s growing logistics sector.
  3. Analysts are in favour of GLP, speculating a value add upon completion of the Group’s acquisitions in Brazil.

Undeterred by the seven percent fall in revenue to US$598 million year-on-year (yoy), GLP is all geared up for strong operational and leasing momentum.

Late last month, GLP announced a 14.4 percent fall in FY14 operating profits before interest and tax to US$504.9 million. This was attributed to the divestment of properties to GLP J-REIT, which caused a 43 percent decline in contribution.

Despite the divestment, demand for rental of modern logistics facilities in Japan has been especially intense in Tokyo and Osaka due to tight new supply. With some facilities being 100% pre-leased way ahead of completion, GLP is in a prime position to ride the sky high rental rates for higher earnings.

Source: GLP 4Q14 Financial Results

GLP Steaming In The Wind

Steering strong leasing trends across all three markets namely China, Japan and Brazil, GLP is stepping up its portfolio growth in the right direction. E-commerce and Third-Party Logistics (3PLs) companies have continued to drive consumption in China, demonstrating strong demand from these industries. This comes as 76 percent of all new leases signed have been from China.

Source: GLP 4Q14 Financial Results

Staying ahead of the game, GLP has made good judgement on its strategic partnerships with a group of Chinese State Owned Enterprises (SOEs). This will not only widen GLP’s customer network, it will also strengthen the Group’s reputation as the top logistics solution provider in China.

The partnership accounted for 25 percent of its record 1.7m sqm of land acquired in the quarter.

Bullish With Brazil

Meanwhile in Brazil, GLP acquired 34 wholly owned logistic properties for US$1.36 billion. This will increase the group’s Brazilian portfolio and significantly enhance their market position in Brazil.

Upon completion in 2Q15, GLP is likely to inject more than 40 percent of the acquired properties into its private fund, potentially adding value to the company.

With such a dominant market position and strong investors, analysts are confident and in favour of GLP, giving the company numerous ‘Buy’ calls. This can also be attributed to GLP’s market dynamics in modern logistic facilities.

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Elaine Lee is a staff writer for Aspire. She is currently pursuing a degree in Economics and Maths with the University of London.

Please click here for more information about this author.

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