Global Logistic Properties: Growing from strength to strength

·    Operational ramp ups and revaluation gains lift 1Q13 earnings
·    Leasing and J-Reit catalysts still intact
·    Maintain Buy, TP raised to S$2.61

1QFYMar13 boosted by better operations and revaluations.  GLP reported a
57% y-o-y boost in bottomline to US$153m on 32% higher revenue of US
$170.5m, thanks to better operational performance, additional contributions
from new acquisitions such as Yupei, Vialog and Transfar, fee income of US
$6.5m and total revaluation gains of US$57m (incl assoc & JCEs). Excluding
the latter, bottomline would have been US$107m, still an impressive 45%
expansion. A total of 0.18msf GFA of new space was completed during the
quarter while it renewed/leased 0.28msm GFA, up 38% from 4Q12 as the group
expanded into new areas such as Wuhan, Hefei and Yangzhou. Lease and rental
rates in China inched up to 91% at an average Rmb1.03psm/day. In Japan,
both metrics remained stable with additional 0.02msm GFA of new and
expansion space.

Growth catalysts still in the works.  The group is maintaining its target
development starts of 2msm GFA for this year (0.47msm in 1Q13) in China.
While macro outlook is more muted, there is still robust demand for
logistics space from tenants that cater to domestic consumption trades such
as e-commerce players. Indicative tenant demand remains at 4.2msm,
relatively unchanged from the previous quarter. GLP’s growth visibility is
backed by a huge land reserve of 9msm GFA and 2.4msm of land held for
future development while rents are still renewed at 5-7% higher than
previously. In Japan, development of 0.17msm GFA in the Development Fund
with CPPIB has commenced. This will enable the group to generate more fee
income as the development kicks off. The planned capital recycling through
a J-Reit is on track. Our current numbers have not imputed any reinvestment
potential from this activity.

Maintain Buy.  We retain our Buy call with a revised RNAV of S$2.61 as we
roll forward our assumptions for the next 12 months. We continue to like
GLP for this leadership positioning in the Asian logistics warehouse space
and strong execution track record. Stock price catalyst remains the planned
monetization of Japan assets and subsequent capital recycling into new
accretive investments.