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Global Logistic Properties Signs Up New Leases

GLP

Global Logistic Properties (SGX: MC0) announced this morning that it had signed lease agreements totalling 106,000 square metres (sqm) with Brazil’s Riachuelo at GLP Gaurulhos in Sao Paulo, Brazil.

GLP’s the largest provider of modern logistics facilities in China, Japan and Brazil while Riachuelo is the largest fashion retail company in Brazil with 212 stores in the country and 39,000 employees.

Riachuelo is a new customer for GLP and it had signed up these new leases because of GLP Gaurulhos’ optimal location” and ability to provide room for “future expansion”, according to Jeffrey H. Schwartz, co-founder and chairman of the Executive Committee of GLP.

Schwartz also commented that “[GLP] believe GLP Guarulhos is the best logistics park in Brazil in terms of building standards, location, infrastructure and space capacity.” The logistic park belongs to GLP Brazil Development Partners I in which GLP holds a 40% stake. It is one of the six funds – with total assets under management of US$11.4b – that GLP is currently involved with.

GLP Guarulhos would eventually have 15 buildings – built in phases – with a total leasable area of 435,000 sqm. There are currently four completed buildings in the logistics park that have 154,000 sqm of leasable area and they are fully-leased.

GLP thinks that the park “is well-positioned to be Brazil’s best master-planned logistics park”, taking into account “its strategic location, expansive scale and industry-leading building specifications.”

I’ve shared previously about how GLP’s portfolio of modern logistics facilities gives it a unique value proposition in the countries it operates in.

Modern facilities carry features like large floor areas, high ceilings, enhanced safety systems, and modern loading docks among others. And, they are in short supply in China, Japan, and Brazil.

GLP has been a market beater since its listing three years ago on 18 Oct 2010 at a price of S$1.96. It last closed at S$2.89 yesterday, giving its shares a gain of 47%, far better than the Straits Times Index’s (SGX: ^STI) loss of 2% in the same period.

But despite its good returns, its corporate performance paints a slightly different story due to its declining profits and cash flow, as shown in the table below:

Financial Year ended 31 March 2011

Last 12 months

% Change

Sales

US$477m

US$578m

21%

Profit

US$706m

US$686m

-3%

Operating Cash Flow

US$361m

US$272m

-25%

Source: S&P Capital IQ

The situation is still not ideal for the company, as results for the first half of its most recent financial year saw half-yearly profits inch up 0.4% year-on-year to US$349m while operating cash flow got slashed by some 53% to US$124m.

In any case, for the company to grow and deliver long-term returns for shareholders, new leases for its properties would likely be very important and that’s something investors should keep their eye on.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.