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GLP’s Big Push Into China & Brazil
Tradeable, Tradeable Ideas | 14 August 2014
By: Raymond Leung
Articles (142) Profile
  1. GLP’s revenue grew 18 percent to hit US$169 million in 1Q15. However, profits fell 12 percent to US$179 million. This was mainly due to reduced shareholdings in GLP China and sale of assets to J-REIT.
  2. GLP expects more works to be completed in 2Q15. This will help expand its gross floor area in China.
  3. GLP’s push into China and Japan is expected to be funded by sales of more Japanese properties to its J-REIT.

Analysts' updates on GLP

Revenue for Global Logistic Properties Limited (GLP) grew 18 percent YoY from US$143 million to US$169 million for 1Q15. However, Profit After Tax and Minority Interest (PATMI) fell 12 percent YoY to US$179 million from US$204 million.

This is due to a reduced shareholding of GLP China, sale of assets to J-REIT, effects of foreign exchange and revaluation of properties. Excluding the above, PATMI expanded by 27 percent as earnings increased from US$48 million to US$61 million.

The improved PATMI was driven by GLP’s China operations which experienced strong leasing momentum in 1Q15. Positive rental reversion of 6.2 percent and stable occupancy of 90 percent can be seen in the Chinese properties.

More completion of works can be expected for GLP’s China properties in 2Q15 that will bring an increase of 0.4 to 0.5 million square meters of gross floor area (GFA). It will bring GLP China on track to meet its target of 2.5 million square meters increase in GFA that was set by the management this year.

GLP tied up with China’s largest state warehouse operator, China Material Storage and Transportation Development Company (CMSTD) for a joint venture (JV). GLP will be injecting US$583 million to the JV that is 49 percent held by the company. GLP will also be investing US$324 million for a 15.3 percent stake in the listed company, CMSTD.

GLP is in the process of purchasing new properties in Brazil where there is robust demand for logistic space. Meanwhile, demand in Japan continues to improve with higher rental reversions.

To fund its expansion, GLP will be selling some of its Japanese properties to its J-REIT which will provide some cash for the company. The recycled capital will then be used to acquire more properties in emerging markets such as China and Brazil where demand for warehouses are high.

Calls from the street maintain a positive outlook to GLP as demand for its properties remain robust in emerging countries. A potential upside of 19.4 percent can be expected based on research from MacQuarie Research.

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

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