Results First Take: Preliminary FY23 results in-line; operating performance held up well
- 4Q23 distributable income came in at Rmb93mn, up 51% y-o-y or 7% q-o-q. This brought the FY23 figure to Rmb351mn, up 32% y-o-y, in-line with our and market estimates
- Occupancy rates continued to improve and is en-route to post further recovery as pre-lease commitments progressively convert
- Recent unit price corrections placed GLP C-REIT at historical low valuation, offering an attractive entry point to investors as market’s preference for defensive high yield names grow
- We currently have a BUY rating with Rmb4.73 TP
FY23 results in-line; operating performance posted progressive improvements. GLP C-REIT reported an in-line set of preliminary 4Q23 results after market close yesterday (18 Jan). 4Q23 revenue came in at c.Rmb120mn, up 36% y-o-y or 3% q-o-q and brought the full year revenue figure to Rmb429mn, up 20% y-o-y and represents c.88% of ours/market estimates, below expectations. However, likely attributable in part to better rental margins, 4Q23 distributable income rose 51% y-o-y or 7% q-o-q to Rmb93mn, concluded the FY23 figure to Rmb351mn, up 32% y-o-y that came in-line with ours and market consensus forecasts. A third dividend of Rmb4.77cts was declared during the quarter, bringing the full-year distribution figure to Rmb21.48cts, representing a distribution ratio of 108% on its full distributable income. Operationally, average monthly passing rents held up well at Rmb37.7 per sqm per mth during the quarter, flat q-o-q. Occupancy performance continued to improve with the overall portfolio recorded c.1.3ppt q-o-q improvement to 89.6% in 4Q23 (or c.91.8% if pre-leasing commitments are included, as compared to c.90.8% in 3Q23). Weakness from its three new projects acquired in Jun-23 (-6ppt q-o-q to 82% in 4Q23) was more than offset by the improvement from its seven core assets (rose 6.2pct q-o-q to 93.8% on average, mainly driven by a 35ppt/11ppt improvement in occupancy for its Tongzhou and Suzhou portfolio). Looking ahead, we expect the number should further recover as pre-lease commitments gradually convert.
An attractive entry point for investors as onshore yields edge lower. Trading at a historical low valuation at c.6.1% FY24F distribution yield (c.3.6% yield spread vs China’s 10-yr govt bond yield that is >2SD above mean), GLP C-REIT’s unit price was sold off by spilled over market worries on the China warehouse sector upon recent weak operating performances from other C-REIT counterparts (e.g. JD C-REIT). Having said that, GLP C-REIT’s improving operating performance over the past two quarters despite a challenging operating environment should help alleviate some of the market concerns. The recent unit price sell-off looks to be an overreaction from the market and we believe creates an attractive point of entry for investors. We currently have a BUY rating with Rmb4.73 TP.