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Global Logistic Properties Marches On With Growth

Global Logistic Properties (SGX: MC0) is one of the largest logistic infrastructure service providers in the region. It is currently active in three key markets; China, Japan, and Brazil (ranked in order of importance based on revenue). When it was listed in Singapore in 2010, it was the largest ever real estate IPO in the world. The company had just announced its full year results for its financial year 2014 (FY2014) this morning.

Marching on with growth

From the figures, nothing seems to be slowing Global Logistic Properties down – not even talks about a slowdown in the Chinese economy (as mentioned earlier, China’s the company’s most important market). The company currently has 655 properties in its portfolio and it enjoys high lease ratios (somewhat akin to occupancy rates for other types of properties) in all of its key markets; it’s currently 91% in China, 99% in Japan, and 96% in Brazil.

In FY2013, Global Logistic Properties had spun-off some of its Japan-based assets into the Japan-listed real estate investment trust GLP J-REIT, which is managed and sponsored by the company. Because of the asset-sale, year-on-year comparisons for the annual figures have to be adjusted to obtain a clearer picture.

The company enjoyed strong growth with adjusted revenue growing by 20% year-on-year to US$598 million. Meanwhile, its adjusted PATMI (profits after taxes and minority interests) had increased by 31% to US$685 million from year-ago levels. Much of that growth was driven by its China-based business, which saw adjusted PATMI growth of some 42%.

But despite this good showing, it should still be noted that much of the company’s profits are still the result of revaluation gains coming from its assets (i.e. a significant chunk of profits is not coming from the company’s core business of providing logistic infrastructure services). Without revaluation gains, Global Logistic Properties’ adjusted PATMI would have been US$250 million, up 17% year-on-year.

Developmental pipelines and financial strength

China, which is also the company’s largest market by net asset size, has a total of 12.8 million square metres of land reserves, giving the company abundant land for future development. Global Logistic Properties currently has 526 properties in China giving a total of 9.5 million sqm in leasable area.

In Japan, the company’s portfolio is focused mainly in Tokyo and Osaka. It currently has 85 properties in Japan with a completed leasable area of 3.9 million sqm. About 1.6 million sqm of it is currently managed by the newly listed GLP J-REIT.

Brazil is currently Global Logistic Properties’ newest and smallest market. However, growth has been strong, with the company doubling the size of its Brazil business through the acquisition of BR Properties’ portfolio this year. As the acquisition will only be completed in August 2014, the company Now, it now has 44 completed properties (as of 31 March 2014) in Brazil with a pipeline of 0.7 million sqm for development.

The company recorded a slight improvement in its balance sheet sequentially; its net debt to assets ratio dropped from 11.8% in the third quarter of FY2014 to 8.9%. Furthermore, its net debt to EBITDA (earnings before interest, taxes, depreciation and amortization) ratio is at a healthy 2.7x and most of its debts have long-term maturities while carrying a low average interest cost of only 3%.

Foolish Summary

The company had opened the trading session today at S$2.78. After stripping away fair value gains, the company is trading at a price/earnings (PE) ratio of 42 based on its current earnings and opening price.

Although the growth potential of Global Logistic Properties is huge – as alluded to by its land bank, for instance – it seems that the market has already baked in rosy expectations for the company based on its share price.

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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 Stanley Lim doesn’t own shares in any companies mentioned.