The Three Numbers That Link Global Logistic Properties

It must be an exciting time for Global Logistic Properties (SGX: MC0), given that one of its customers, TMall, is part of the soon-to-be floated Alibaba Group.

GLP’s other customers read like a Who’s Who of the commercial world. They include Adidas, Coca-Cola, LVMH and Unilever. Together these companies help GLP achieve a return of 6% on shareholder equity.

Global Logistic Properties is essentially a property company with trimmings. It provides warehousing, logistics and supply chain solutions for manufacturers, retailers and other logistic companies. In other words, it helps companies store goods and also helps them move the stuff around to where they are needed.

In common with other property companies, GLP has a high Net Income Margin. Its margin of 105% implies that it makes $105 of Net Profit on every $100 of sales. The unusually high margin stems primarily from changes to its asset value, which can both rise and fall disproportionately. When extraordinary items are excluded, its trailing 12-month margin of 67% starts to approach those of CapitaMall Trust (SGX: C38U) and Hongkong Land (SGX: H78).

But what GLP wins on the swings it loses on the roundabouts. Its Asset Turnover is a below-market average of 0.04. On average Singapore’s blue chips achieve revenues of $46 for every $100 of asset employed. In the case of GLP, it only generates $4 for every $100 of assets.

Interestingly, Global Logistic Properties is not overly leveraged. Its Leverage Ratio of 1.4 is below the median for the 30 companies that make up the Straits Times Index (SGX: ^STI).

By compartmentalising Global Logistic Properties’ Return on Equity (RoE), it is easy to see how they are linked together. GLP’s RoE of 6% is the product of an abnormally-high Net Income Margin of 106%; a disappointingly-low Asset Turnover of 0.04 and a Leverage Ratio of 1.4.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your FREE subscription to Take Stock — Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock — Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.

Like us on Facebook to keep up-to-date with our latest news and articles. The Motley Fool’s purpose is to help the world invest, better.

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