Wednesday, March 23, 2016


GLP: CLSA downgrades to Sell from U/PF, highlighting that recent outperformance is unwarranted, and there is no improvement in operating environment and no significant newsflow.

The house says there is room for disappointment in China. FY17 China development starts and completions growth are expected at 2.5% and 2.0% y/y, and that the street is too optimistic, with room for further earnings downgrades.

On risks, the house cites privatisation is elusive. GLP is now trading at 0.8x P/B, assuming a 20-25% premium (recent transactions), that would imply 1x P/B. Recently, major shareholder Hillhouse Capital acquired 8% stake at 1.2x P/B less than 12 months ago, and as such, privatisation appears less likely.

The house does not rule out that it could spin off a part of the Stabilized China assets. That is a catalyst not baked into their forecasts.

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