Would Benjamin Graham Buy Global Logistic Properties?

Global Logistic Properties (SGX: MC0), often known as GLP, is the leading provider of logistics facilities in China, Japan and Brazil.

The company’s portfolio consists of over 300m square feet of space located strategically across 77 cities. The developments are close to airports, seaports and highway networks. This enables GLP to meet customer needs for import and export logistics as well as domestic market distribution.

GLP is focussed on improving the supply chain infrastructure for manufacturers and retailers. Importantly, a key driver for GLP is domestic demand. With large segments of its business in Japan and China, GLP could stand to gain from the latest round of monetary stimulus in Japan under Shinzo Abe. Slowing growth in China could be an area of concern, though.

Whatever might happen, GLP currently appears to be in good financial health. Its current ratio – the ratio of current assets to current liabilities – stands at an three. Putting this in perspective, a value investor such as Benjamin Graham would look for companies with a ratio of at least two.

In fact, even the company’s total debts stand at only 60% of the total current assets. With strong earnings growth since its listing in 2010 to match, it would seem that GLP could be a relatively risk-free investment.

Relatively risk free is not the same as free of risk, though. Therefore investors might want a bit more for their money than the 2.4% yield that is currently available on a risk-free investment such as the 10-year US Treasury.

This could be where GLP might let itself down as a value investment. The earnings yield of 5.7% is not too bad. But value investor cold find the 1.6% dividend yield a tad meagre

The price to earnings ratio of 17 is slightly higher than the market average and also the historical values of the P/E. Some might suggest that GLP could be a bit on the expensive side.

A market capitalisation that is some two-and-a-half times the net current asset value could also suggests that GLP might be too expensive to be considered a value investment.

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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 Adam Kuo doesn’t own shares in any companies mentioned.