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Analysts Bullish on GLP; 30% Upside!
Aspire | 18 August 2015
By: Raymond Leung
Articles (142) Profile

Analysts' updates as at 18/08/2015

After the release of its latest quarter, the management of Global Logistic Properties (GLP) announced a lower earning guidance for its Chinese properties. This caused a sell down in the market with GLP losing over 20 percent in value from its year high. Despite the adjustment, analysts believe that there is still value in this counter. Let us see why!

Stronger Earnings Expected for 1Q16

Source: Revenue of Global Logistic Properties, Financial Times

Revenue for GLP grew 12 percent year on year (yoy) to US$190 million from the previous US$169 million. This coupled with revaluation gains, led the earnings for the group to increase by 49 percent to US$268 million from US$179 million.

Source: Net Income of Global Logistic Properties, Financial Times

If this trend continues, GLP will be able to turn around from the drop in net income in FY15 to a growth in FY16.

Dimming Performance for China
GLP’s management lowered their development target for GLP’s properties in China. This is due to the near term uncertainty in the Chinese economy as shown in recent economic data. However, their long term outlook for China remains positive and will be looking to ramp up developments based on demand.

Currently, GLP’s portfolio occupancy rate for its properties in China has fallen by 3 percentage points to 88 percent. GLP lowered the development start target to US$1.7 billion, a 5 percent yoy increase. Meanwhile, the development completion target has been lowered to US$1.1 billion, a 12 percent yoy growth.

Growing Intensively in the US

Source: Geographic Breakdown of GLP’s Portfolio By NAV, GLP

With the slowing down of the Chinese economy, the management of GLP has been actively seeking to diversify into other markets. The US is one of the key markets as demand for logistic properties grow with the recovering economy. Likewise, there are many investors who are interested to invest in the sector.

Earlier this year, GLP announced that it has reached an agreement to purchase a US$4.55 billion US logistic properties portfolio from Industrial Income Trust. This is GLP’s second purchase of properties in the US, and this effectively makes it the second largest owner and operator of logistic properties in the US.

Currently, GLP is talking to third party capital partners about investing in its US portfolio. Its fully owned US portfolio is expected to pare down to 10 percent and thus frees up its capital for future investments, allowing its fund management business to grow.


The recent sell down seems to be an overreaction by investors towards the lowered development targets for China. Analysts from the street remain bullish towards the counter but lowered their target price to factor in the slower growth in GLP’s main market.

Furthermore, the developments in the US may bring more upside for GLP than expected. This comes from the strengthening economy and currency which may result in the rise of property prices and a higher currency translation.

Analysts from CIMB Research reiterated their “Buy” call for GLP but lowered the target price to $3.25 from the previous $3.34 to account for the slower Chinese growth. They cited that the uncertainty in the Chinese economy will hinder growth in the near term, but maintained a positive long term view towards the modern warehouse sector.

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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