Global Logistic Properties (GLP)

[kazukirai]

This has got to be the most advertised IPO in recent history.
It's headlining today's Straits Times and I've been hearing their commercial for application to the IPO on Class 95fm every 5 mins.

Any views on why the underwriter's pushing it into the mouth of the retail investors so much? Is this a normal practice or is it signs of a desperate underwriter?

Appreciate those with industry knowledge could share their thoughts on this.

[yeokiwi]

I don't think they are desperate. Apparently,the shares are quite well-received by funds and institutions. The IPO price is also set at the highest price of the indicative price range.

I think this IPO is worth to tikum for some coffee money.
At least a stag.

But, I am not in the industry and so my opinions may be very far off

[PassiveReturns]

Most of the time, it's better and safest to avoid such "hot stuff".

[brattzz]

if it's soo good, there' no need to advertise... it will be fully taken up privately...

[Musicwhiz]

My personal take (I am not an expert at property IPOs and only browsed through the 558-page prospectus):-

1) GIC seems to be in a big hurry to offload part of its stake in GLP, as they had brought forward the application closing date due to "strong demand". To me, it seems like they are in somewhat of a big hurry - for what reason? Your guess is as good as mine.

2) There is no stated dividend policy in the prospectus that I read about. It's basically growth, growth and perceived growth. Assuming it comes true, what are the prospects like?

3) There may (the big word is MAY) be fund-raising within 2-3 years depending on "opportunities". And this after raising S$3.9 billion in one of Singapore's largest IPOs. Go figure - why do they need so much cash? For growth or to pay off interco-loans?

4) If something is too good to be true, start asking why.

5) GLP is heavily invested in China properties, and their stated growth area is in China. It doesn't take a genius to figure out what the Chinese Government has been trying to do with its property market for the last 18 months. Is this why GIC is so eager to offload? Is there really growth to be envisaged?

6) I can't get a good handle on the Income Statement because of so many "changes in fair value". This sounds quite similar to biological assets which China Milk and Oceanus like to put in their income statements too. So what happens if there is a large "impairment loss"? Does this impact cash flow generation ability?

7) What is GLP's valuation @ IPO launch price of S$1.96? I believe there was no mention of this at all. Or is NAV more important when it comes to a property play?

8) Balance Sheet looks heavily geared to me, though I suspect quite a bit of the funds raised will be used to pay off the loans.

9) Not enough information provided in Statement of Cash Flows, and this is the most important statement!

To apply or not to apply? For me, it's a definite NO.

[yeokiwi]

All the forum members here are very rational!

But, everyone is talking until GLP is liked a junk stock..haha
Anyway, their portfolio is impressive and for any funds that wish to own logistics properties in China(so that they can boast to their unitholders..), it is an outstanding option(price aside....)

http://www.glprop.com/zh_en/

As for myself, I only have a probability number that is spinning in my head on the possibility of GLP going above IPO price in the first week. Personally, I thought the possibility is very high.(should be better than 4D isn't it?)

Hopefully, this stock will go into STI index and reduce the banks' weightages. DBS, UOB and OCBC are lousy banks that are stopping STI index to hit 10000.

Coffee money anyone???

[dydx]

GLP's IPO prospectus is 558 pages!.....
http://info.sgx.com/webipo.nsf/6bb750ded...900190c78/$FILE/2.2.01%20Global%20Logistic%20Properties%20Limited%20Prospectus%20dated%2011%20Oct%202010%20(Clean).pdf
How many investors - especially retail investors! - will and can take the pain to go through the document in detail and to really understand the background and the issue?

The 558 pages involved a lot of work by many professionals - advisors, lawyers, accountants, bankers, copy-writers, PR consultants, etc. - which will cost a cool $103.3m in estimated expenses (see page 59)!! Which responsible private companies will spend this kind of money - which ultimately will be paid for by the new investors - on an IPO? I have also noticed that GLP is advertising the IPO aggressively on various radios, newspapers and TVs, asking people just go to the nearest ATMs to apply. It just appears to me GLP and its sponsors just want our money, and is spending a great deal with the view to drum up investors' interest and create an active market for the stock post-IPO.

Based on the Offering Price of $1.96, and the NAV per Share as of June 30, 2010 (and after adjustments for the Share Split and the issuance of Reorganization Shares) of S$1.077 (see page 62), new investors in the IPO are asked to pay a 82% premium over essentially warehouse assets in PRC and Japan at fully appraised current market value as at 30Jun10, plus approx. USD422m in Intangible Assets (comprising USD374.4m in Goodwill, USD40.4m in Tradmark, and USD7.1m in the form of some non-competition agreements presumably provided by some incumbent executive officers).

GLP is essentially a developer/owner/financier of so-called modern warehousing complexes - think of it, what so modern about warehouses?!, and even modern warehouses are just a commodity! - deriving revenue from leasing warehousing space to MNCs which have their own self-operated logistic operations, or independent 3rd-party logistics (so-called 3PL) service providers. I ask myself, what's so great about owning warehouses? I can also imagine these - (1) most of GLP's customers must be hard-bargaining, tough customers; (2) supply of warehouses may become in excess in the future, and tenants will demand a big cut in the rental rates; and (3) GLP's customers will simply move elsewhere for lower rates, especially in a recession.

Given a choice, I would rather invest in an asset-light 3PL business which just rents its warehouse space requirements from GLP on a flexible basis.

[d.o.g.]

The comments so far have been mostly skeptical, which is a good thing.

Here's a cynical one:

Anyone who manages to grab any shares at the IPO is likely to be able to stag them for a small profit. The reason being that the great unwashed masses i.e. retail investors see:

GIC = PAP = good

I saw this firsthand at a financial planning seminar. During the Q&A someone asked (in Mandarin): "GIC can buy or not?"

Most people have no clue at all as to what GLP actually is or does, nor do they care. All they want to know is whether they can make money. Those who try to find out a bit more will probably see:

Property = good
China = good

We should all do well to heed the English writer Alexander Pope:

A little learning is a dangerous thing;
Drink deep, or taste not the Pierian Spring

The skeptical investor should think about why GIC is selling. Some things to think about:

1. GIC doesn't need the money
2. GIC doesn't need the publicity
3. Japan accounts for 45% of GFA but 80% of the portfolio value
4. The IPO price is at a 9% premium ($1.96 vs $1.80; see p62 of prospectus) to the adjusted NAV per share

Some simple conjectures:

1. GIC wouldn't sell if the overall prospects were good
2. If Japan continues to stagnate or the yen depreciates, the portfolio will suffer

If we look more closely at Japan as a country, property there has been depreciating for 20 years. Part of this is the fallout from the 80s, part of this is demographics - a smaller and older population will buy fewer manufactured goods.

China may be growing, but at 20% of the portfolio value, even if it grows 10% a year, it will be 7 years before the Chinese properties double in value and become 40% of the portfolio (faster, if the Japanese properties continue depreciating).

So anyone buying into GLP is actually buying Japanese warehouses, with a call option on China. If China works out, the investor will do OK. If China doesn't work out, the portfolio will track Japan's performance, which has been anything but stellar in the last 20 years. There doesn't seem to be any margin of safety in the portfolio makeup.

Logically, an investor who wants warehouse exposure to China should look for a company whose portfolio is concentrated in China, not just by GFA but also by value.

As usual, YMMV.

[ncy]

Management presented a compelling growth story. For long term investors, this will be a good proxy to gain exposure to the logistics market growth in China backed by resilient cash flows in its Japanese operations

Business Times - 13 Oct 2010
GLP exploring spinning off a Reit

Aim is to recycle capital to invest in higher-return marts

By LYNETTE KHOO

GLOBAL Logistic Properties (GLP) may consider spinning off a real estate investment trust (Reit) to monetise its assets, particularly completed properties in Japan.

'We are always exploring that option,' GLP chief executive Ming Z Mei told BT yesterday. 'When the market is ready, we will look at either the Reit or private fund structures so that we can recycle the capital to invest in higher-return markets.'

But GLP is in no hurry to do so as strong operational cashflows and proceeds from its initial public offer are sufficient to support current expansion plans for the next three to four years, he added.

The major logistic player in Japan and China has launched a $3.9 billion IPO this week, closely rivalling Singapore's largest-ever IPO by SingTel that raised over $4 billion in 1993.

GLP will also start looking at a private development fund in Japan with institutional investors next year to acquire land, develop the plots and lease them, which is expected to open another avenue of stable fee income for GLP, Mr Mei said.

GLP's Japan business, where fair-value loss on investment properties sank the group into the red for the fiscal year ended March 31, is deemed as the less attractive part of the business compared to its China exposure.

But Mr Mei noted that despite Japan's dismal GDP numbers, GLP was still enjoying a compounded annual growth rate of 42.9 per cent in gross floor area in the last five years. The pressure on margins is also spurring companies there to outsource their logistics requirements, driving up demand for GLP's services.

Analysts felt that though the Japan business is flattening out, it is a cash cow providing stable cashflows that can be deployed to fund GLP's expansion in China. 'From a yield perspective, it is more attractive if their completed assets are in the form of a Reit,' said CIMB analyst Janice Ding.

Another analyst noted that the prospect of a Reit serves as a catalyst for GLP.

For GLP's China business, Ms Ding's concern is whether GLP can continue to secure land given China's increased re-zoning of land to residential/commercial use. From cash consideration, GLP can still benefit from selling the land plots.

Mr Mei conceded that one of the biggest risks GLP faces as the largest modern logistics facility provider in China is political risks.

GLP's entire development pipeline of 7.9 million sq m is in China, and negotiations to secure more land is still ongoing.

That is why it is important to bring in China's pension fund National Council for Social Security Fund (NSSF) as a cornerstone investor, Mr Mei said. Through its fund manager Bosera Asset Management Co, NSSF is subscribing for 100 million shares or a 2.2 per cent stake, which is said to be its first IPO investment.

BT understands that China Investment Corporation, the country's sovereign wealth fund, is also an anchor investor in the IPO, though this is not disclosed in the IPO prospectus.

China is expected to become a more significant part of GLP's business in the long term. Mr Mei believes that over the next three to five years, half of GLP's earnings will come from China, up from the current 15 per cent share.

GLP hopes to enter new cities in China within the next one to two years, particularly in the mid-western part of China.

When asked why GLP, majority owned by Government of Singapore Investment Corporation (GIC), chose to list in Singapore and whether the GIC link played any role in its decision, Mr Mei quipped: 'If I say it's nothing to do with GIC, I'm lying to you.

'From a liquidity standpoint, Hong Kong is more attractive, because of the bigger market, and from the China angle, Hong Kong is more attractive.

'But we were looking at a pan-Asian plan and Singapore is more neutral, especially if we go into markets like India and Vietnam in the future.'

[kazukirai]

A hilarious take on GLP. (from Temasek Hedge)

Also, if so many of us retail investors are seeing the GLP IPO as a bad investment, then who's going to subscribe to it? Or will the greater fool theory prevail once again?