China to drive growth
We acknowledge the risks of higher competition among logistics facilities and land supply constraints but do not expect them to undermine GLP’s market leader position. The combined spending on logistics facilities by GLP, Alibaba and JD.com is less than 5% the required amount for China’s logistics space per capita to equal a third that of the US. As such, we expect demand to more than absorb the oncoming supply of logistics space. In the same vein, the land supply constraints are mitigated by the strategic partners, such as SOEs, COFCO and Sinotrans, which are not only likely to increase land supply but leasing demand as well. We believe GLP will maintain its market leader position in China through the fostering of strategic partnerships and enhancing customer stickiness.
AUM - CAGR of 28%
We expect GLP’s AUM to post a CAGR of 28% over FY15-17 through the injection of stabilised assets into funds/REITs and the investment of committed capital from its development funds. This will be a positive as it not only builds its management fee platform but also enables capital to be recycled into its growing China portfolio.
Reiterate Add
GLP is trading at a 19% discount to RNAV, about 1 s.d. deeper than its historical mean discount of 12%. Additionally, we expect GLP’s RNAV to grow 9% and 2% in FY16 and FY17, respectively, driven by growth in its China assets and value creation from an enlarged fund management portfolio.
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