GLP: Goldman initiates at Buy with TP $2.34, based on an NAV disc of 10%, reflecting GLP’s earnings quality and growth potential.
Says GLP offers the leading China/Japan footprint of modern warehouses, a sector where size and depth of network are key competitive advantages. Notes GLP is geared towards several beneficial trends: 1) domestic consumption in China (76% of China leases) driving logistics demand with China’s staples spending to leapfrog US by 2020E; 2) logistics outsourcing in China/Japan; and 3) operating in markets with a shortage of modern warehouses.
Expects GLP’s leadership in China/Japan and its China expansion to span years, funded by Japan’s annuity income.
Sees GLP outperforming its sector with a +16% EPS 3-year CAGR through 2014E, driven by volume build-out (less price/rents), potentially rising to +20% if its development starts target are met.
Believes GLP is several years ahead of its peers in terms of scale and footprint, and that the mkt is not attributing any value to its development business, despite its track record and visible development pipeline.
Adds, in China, GLP operates in a preferred segment within real estate where there are less govt controls, and access to onshore and offshore capital are favorable vs. constrictive for other segments.
On the Japan segment, the house notes stable margins/ cash flow may lead to dividend surprise.