GLP

GLP: 1QFY16 headline net profit jumped 49.4% y/y to US$268.1m, mainly boosted by higher fair value gains and the inclusion of the US portfolio. Excluding revaluations, earnings fell 7% to US$56.6m, forming 18% of street's full year estimates.

Revenue climbed 12.3% to US$169.3m on the back of completion of development projects, higher rents in China and inclusion of management fees from GLP US Income Partners I, but partially offset by loss of contributions from nine Japan properties sold to GLP J-REIT in Sep '14 and weaker JPY/USD (-19%).

Leasing momentum continued to be strong, as China saw a 29% increase in new leases that were mostly signed with industry leaders in the e-commerce, retail and automotive industries, and positive rental reversions of 7.3%, although occupancy slipped 3ppt to 88%.

In Japan, new leases surged 119%, with rent uplift of 5.5%, while Brazil's new leases jumped 141%, with same-property rent growth of 6.2%.

Meanwhile, the group booked sizable fair value gains of US$186.7m in China, on tighter land supply and lower borrowing costs, and US$44.3m Japan due to a compression in cap rate to 4.9% (-11bps).

Bottom line (excluding revaluations) was weighed by rising property-related expenses (+21.1%) on an enlarged portfolio, higher staff and business costs (+44.3%) resulting from its expansion, as well as increased minority interest of US$88.5m (+247%) following a Chinese consortium’s investment in GLP China in Jun '14.

Notably, GLP has lowered its FY16 targets for development starts and completions in China to US$1.7b (-23%) and US$1.1b (-21%), suggesting that sales contribution from GLP's China portfolio may be deferred in view of the slowdown in the Chinese economy.

But management reaffirmed its targets in Japan and Brazil for starts and completions of US$980m and US$720m, and US$250m and US$140m, respectively.

The new focus would be in US, where GLP's is acquiring a massive US$4.55b logistics portfolio, which will enlarge its US footprint by 50% to 173m sf, and turn it into the second largest logistics owner and operator there.

GLP intends to grow its recurring fee income via its fund management platform, which management believes should translate to a relatively superior risk-adjusted return for the group.

At the current price, GLP is valued at 0.96x P/B and 30% discount to market RNAV. Consensus is generally bullish on the counter with 16 Buy and 1 Hold ratings, and average 12-month TP of $3.20.