May 19, 2017 8:12 pm JST

Singapore GLP's Q4 net profit surges on asset values, takeover talks continue

SINGAPORE (Nikkei Markets) -- Global Logistic Properties, one of the world's largest operators of warehouses and other logistics facilities, Friday reported a 62% increase in fourth-quarter net profit following higher valuations for its assets in Japan, U.S. and Brazil.

GLP, which is backed by Singapore sovereign wealth fund GIC, earned $247 million in the three months ended March 31, up from $153 million in the same period a year ago. However, core, or recurring earnings, fell 5% to $155 million after GLP reduced its stake in a portfolio of U.S. properties.

For the 12 months to March, GLP achieved a net profit of $794 million, a 10% increase over the previous fiscal year that was in line with most analysts' expectations.

The company, which has received takeover bids from several parties, gave no further details on any possible sale except to reiterate that discussions with shortlisted parties and the due diligence process both continue. It also said there is no definitive agreement with any potential suitor, and no assurance that a transaction would materialize.

Commenting on its results, GLP said the revaluation gains in the fourth quarter reflected the cap rate compression in Japan, U.S. and Brazil, which are its main markets outside of China. Cap rates, which measure the rental income relative to property value, compress when a market strengthens and risks fall, increasing a property's value.

Rising customer demand and favorable market conditions resulted in rental growth of 8.9% for leases that were renewed during 2016-17 financial year, it added.

GLP owns or manages about 55 million square meters of logistics space, which are in demand due to the growing popularity of online shopping.

CEO Ming Z. Mei said the outlook is positive, citing the growth in GLP's property fund management business and strong investor demand for income-producing logistics assets in China and Brazil.

GLP had $39 billion in assets under management as at end March, up from $35 billion a year ago. About $12 billion of the capital is yet to be deployed.

"Demand from institutional investors to partner with GLP remains strong and we continue to explore options to grow our fund management platform in new and existing markets, in line with our capital recycling strategy," he said.

GLP began a strategic review of options to enhance shareholder value in December, following a request from GIC Real Estate, its largest shareholder, which is the property arm of GIC.

It has since shortlisted several bidders, including a party connected to CEO Mei and non-executive director Fang Fenglei, the founding partner of Chinese private equity giant Hopu Investment Management.

Mei and Fang have recused themselves from all board discussions and decisions relating to the strategic review to avoid any potential conflict of interest.

Stephen Schutte, GLP's chief operating officer, said during a conference call the talks have not had any impact on day-to-day operations, and that staff remained "very focused and diligent" in following the business plan laid out before the strategic review.

DBS Vickers, which has a "hold" recommendation on GLP, said in a previous report that GLP could potentially be worth between 3 Singapore dollars ($2.16) and S$3.23 a share, based on the premiums paid during previous takeovers of property companies in Singapore.

The share price could, however, drop back to GLP's net asset value per share of S$2.50-2.60 if a takeover did not materialize.

GLP shares are currently trading around S$2.90 apiece, having risen around 60% since November when talk of the strategic review began.

--Kevin Lim

--Nikkei Markets is a real-time financial news service for South East Asia's markets published by Nikkei NewsRise Asia Pte Ltd, a Nikkei and NewsRise joint venture company. Nikkei Markets provides wide companies coverage in the region, including the Nikkei's Asia300 companies.

Asia300

Global Logistic Properties Ltd.

Singapore

Market(Ticker): SES(MC0)
Sector:
Industry:
Finance
Real Estate Development
Market cap(USD): 11,800.8M
Shares: 4,844.37M

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