GLP

GLP Maintains O/p with $2.40 TP. House hosted a series of investordialogue sessions with GLP’smgt in the past week for afew UK and US domiciled investors.Questions centred on GLP’s growth strategy, particularly on its thoughtson capital recycling. DeputyChairman articulated that he intends to run GLPin a more prudent manner comparedto the previous Prologis model, citing lessons learnt during the last financialcrisis. Under GLP, he intendsto grow its China platform in a morecalibrated manner by embarking ondevelopment projects only withsubstantial pre-commitments.Development risk is also shared with JV partners as projects in Japan aretaken on under the private fund level.GLP also reiterated on theattractiveness of Japan, citing itslarge in-house team, its marketleadership and lack of availablemodern facilities as key barriers toentry. It intends to focus on Chinaand Japan in the near- and mid-term. Investors’ feedback also appears positive so far, as GLP has deliveredoperationally. Its China growth pathis likely to see speed bumps along theway, and believe it is essential for t he group to maintain a nimblebalance sheet. Estimate a healthylook-through net gearing of 0.36x inFY13, backed by strong OCF ofUS$440m. The targeted partnershipswith GLCs (CIC and CPPIB) shouldalso cushion the perceived risks at theprivate fund level. Credit conditionsin Japan work in its favour, allowingcash-on-cash yields of 18%. House believe this segment will continue toanchor its growth in China.