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Global Logistic Properties – Fundamental vs Technical Analysis
(Disclaimer: This post is solely for your own learning purpose)
GLP has US$36 billion property portfolio encompasses 52 million sqm (559 million sq ft) of logistics facilities across China, Japan, US and Brazil.
- GLP’s growth strategy is centered on being the best operator, creating value through developments and expanding its global footprint via its fund management platform
- GLP is a SGX-listed company (stock code: MC0.SI) with a market capitalization of US$6 billion; GIC is the largest single investor in GLP
- GLP provides investors with an opportunity to capitalize on the fast-growing logistics industry in the largest and most rapidly expanding markets across the globe.
- The company manages a portfolio of 229 logistics parks in 38 cities in China, covering all major China airports, seaports, highway networks, and logistics hubs; 94 logistics parks in 7 major markets primarily in Tokyo and Osaka, Japan; 63 logistics parks primarily in São Paulo and Rio de Janeiro, Brazil; 690 logistics parks in the United States, which are located in 32 markets.
- It is also involved in the property investment and management activities. The company serves manufacturers, including auto and parts, electronics/high-tech, machinery, and pharmaceuticals/medical instruments companies; retailers, such as fast-moving consumer goods, and e-commerce/retail/fast food chains; and third party logistics companies.
From the above introduction, we can see that this company has a large operation and is growing rapidly over past few years. GLP’s core business is classified under the below 3 categories:
- Fund Management, GLP partners with world class investors to grow its network. Its fund management platform enhances returns while enabling GLP to grow faster.
- Development, GLP builds to meet market demand and serve customers’ needs. It generates significant value through development.
- Operations, GLP owns and manages modern logistics facilities. Operations is the foundation of its business model (largest in China, Japan & Brazil. 2nd largest in US)
China – Amazon. Japan – Hitachi Transport system. Brazil – Tavex Algodonera.
One thing that caught my attention is the focus on sustainability by the company (i.e. building onto recurring income via the Fund management platform (CAGR of 92% over past 5 years).
Generally, the fundamentals of GLP are sound except on the risk of Forex fluctuation (Forex have been fluctuation widely with the crash in oil price, brexit, etc – especially election is around the corner for US).
However, I can see that GLP is taking steps to mitigate some of the risk (i.e. by way of issuing local currency denominated bonds to reduce Fx exposure).
Fundamental Analysis (3R):
- Right Management: Whether management deliver what they have promised, Whether management’s actions are aligned to shareholders
- Right Business: Does the business model have a strong moat? Is the business in the right industry & time to capture future growth potentials?
- Right Numbers: Growing revenue, Gross profit margins, Operating cashflow, Net profit margins
(Do leave a note to myself if you would like to know more on how I dissect the fundamentals of GLP).
You might be asking in your mind – This seems to be a good company, the share price should be doing quite well isn’t it?
I am sorry to tell you that, in the financial market, everything is based on market demand and supply – i.e. if the supply of the shares is more than the demand, no matter how good the company is, the price would remain below the intrinsic value of the company (although one day it may go up to the Intrinsic Value, no one really knows when. Key question – how many months/years are you willing to wait?)
In such a scenario, I would apply the knowledge from Technical Analysis for precision.
From the chart we can see that GLP has recently break out at 1.85 region but is facing a relative strong resistance at 2.00 range. Although it is a sign of completion of a long term down cycle, a confirmation is needed for the consolidation/up cycle phase.
Long term moving average (200) is still on the downtrend
Personally, I would be patient with this stock and wait for the back-testing to be completed before taking any action.
Key date for review 12 August 2016
Do share your views in the comment box below as well!