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Can Global Logistic Properties Ltd Be A Good Investment Over The Long Term?

Credit: Axisadman

The demand for warehouse space has been growing over the last decade as reported by Colliers International and many other real estate management companies. This is largely because e-commerce is now getting more popular with many people choosing to shop online.

One company that could gain from this trend is Global Logistic Properties Ltd (SGX: MC0). The company has a logistics property portfolio covering 48 million square metres in four countries, namely, China, Japan, Brazil, and the U.S.

In the middle of the year, Global Logistic Properties had acquired around 200 U.S. warehouses, showing its commitment to becoming one of the biggest warehousing companies in the world.

This is by no means a small feat and requires a lot of capital. On this front, the company is backed by GIC, one of the Singapore government’s investment arms – this may help give Global Logistic Properties credibility to raise funds.

Global Logistic Properties’ business model is interesting as it is an owner-operator of real estate (the company has direct ownership of its properties ranging from 10% to 55%) and also provides fund management services.

Revenue is generated from rental income and its fund management service which had US$32 billion of assets under management (AUM) as of 30 September 2015. These provide the company with stable revenue generation ability which could potentially also mean steady net profits.

For Global Logistic Properties to grow its revenue, it can do so through an increase in AUM.

In fact, given that the company’s main business is in management of real estate, I think it would prefer to grow by growing its AUM. This can be done by starting new funds via partnership with private investors. Also, an increase in asset values over time should lead to an increase in rental revenue (assuming the percentage yield stays the same but is applied to the new property value).

The company has stable recurring income streams which can be used to reward shareholders. Investors also benefit from fair value gains on the properties from Global Logistic Properties’ direct ownership in real estate as it leads to expansion of net asset value (NAV) per share.

Currently Global Logistic Properties is trading at S$2.07, which is a 17% discount to its NAV of US$1.77 per share (around S$2.48), and has a reasonable net debt to asset level of 13.3% as of 30 September 2015.

Keeping these two factors in mind, they show why Global Logistic Properties could be worth a deeper look by investors who are on the hunt for a good long-term 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 Esjay does not own shares in any companies mentioned.