Global Logistic Prop Limited: Strategic purchase of ACL

- Acquires 53.1% of ACL giving it exposure to the
fastest growing segment of the logistics market –
airside cargo logistics
- Strengthens portfolio and market position; earnings
and valuation accretive
- Maintain Buy, TP S$2.76

2nd acquisition within 3 months of listing. In another exercise that demonstrates management's execution ability, GLP is proposing to purchase a 53.14% stake in Airport City Development Co Ltd (ACL) for RMB2483m. ACL is the sole developer in the Beijing Capital International Airport (BCIA) air cargo handling and bonded logistics area. The deal will be funded by an issue of new shares (57%) and cash (43%) and result in a 2.8% expansion in share capital.

Strategic acquisition, enhancement in market position, earnings and valuation. This acquisition is positive for the group as the unique on-tarmac assets complements the existing portfolio by giving exposure to the fastest growing and high-value airside cargo handling and bonded logistics area while strengthening the group's positioning in the Tier 1 city. Cargo throughput in BCIA had grown by 17% in 2005-09 and is expected to improve by 15% annually from 2010-15. As a result, we believe rentals are likely to appreciate at a robust clip over the same period. We expect the purchase to be earnings accretive, with the initial completed GFA boosting earnings by 2-3% and increasing as the development pipeline is completed. Meanwhile, RNAV is maintained at S$2.76, after factoring the enlargement in share capital.

Maintain buy, TP S$2.76. We remain upbeat on the prospects of GLP. Our BUY call and target price of S$2.76 for GLP is based on parity to our sum of parts valuation, which has factored in valuation of existing assets as well as imputing a value of US$1380m for potential asset origination through its ability to deploy its balance sheet capacity.

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