GLP

GLP: (S$1.66) 3QFY16 results underpinned by rental uplift and US entry
GLP's 3QFY16 headline net profit swelled 63.8% y/y to US$184.2m (+64% y/y). Excluding revaluation gains, core net profit of US$82.9m (+25.8%) brought 9M15 earnings to 70% of street's full year forecast.

For the quarter revenue climbed 11.1% to US$198.9m, mainly from completion and stabilisation of development projects in China, increasing rents and the inclusion of management fee income from GLP US Income Partners I.

The top line growth was partially offset by the syndication of 60% of GLP Brazil Income Partners II portfolio and sale of Japan properties, as well as the weakening JPY and RMB against USD.

Operationally, the strong leasing momentum in China continued, with a 22% increase in new and renewal leases of 2.4m sqm, lease ratio of 93% (+4ppt q/q) and positive rental reversions of 7.1%.

In Japan, properties saw rent uplift of 5.4% on renewals and occupancy maintained at 99%, while Brazil's same-property rent slipped 4.5% (2QFY16: +7.7%) on stable occupancy of 95%.

In the US, overall portfolio lease ratio crept up to 95% (+1% q/q). Renewed rents jumped 19.4%, with same-property net operating income up 8.1%.

Bottom line was further boosted by higher contributions of US$48.5m (+117%) from JVs and associates, US$55.8m gain from the syndication of its 45% interest in GLP US Income Partners I in Oct 2015 and higher fair value gains of US$187.1m (+93%) on its properties. This was partially eroded by higher finance costs of US$44.7m (+350%) due to mark-to-market losses on FX contracts and its USD MTN bond and higher tax of US$94.6m (+101%).

Overall development starts and completions in the quarter amounted to US$826m (+297%) and US$516m (+68%), meeting 55% and 66% of FY16 targets. Management is confident of achieving its its full year guidance.

While GLP's share price has been on the downtrend due to its exposure to slower China growth, capital values for GLP's properties in China are on an uptrend, backed by government policy tailwinds. This could translate into higher revaluation gains, which in turn will lead to higher asset values.

The stock currently trades at a steep 43% discount to its consensus RNAV/share of $2.89.