Sunday, July 2, 2017

Global Logistic Properties Could Be Gone Soon

As e-commerce grows, particularly in China, it is leading to significant changes in logistics. This includes demand for warehouses, where only about 20% of the installed base in China is sufficient to serve the needs of modern logistics systems. Global Logistic Properties (or "GLP") (OTCPK:GBTZY) is among the largest developers and operators of warehouses in the world, with a very strong leading presence in China, as well as the #1 and #2 positions in Japan and the U.S., respectively (and a leading, albeit small, portfolio in Brazil).

Once a relatively popular name, GLP shares lost close to half their value from mid-2014 to early 2016 as the Chinese weakened on softer consumer demand and growing supply. The share price started to really recover in late 2016 on news that the company was undertaking a strategic review and now is near a "put up or shut up" point for potential strategic bidders. I would be surprised if management accepted a bid below S$3.10/share, or about $23.65 per ADR - offering the prospect of a decent near-term return. While there is definitely a risk that this review process will not lead to a bid and that investor worries about still-weak conditions in China will lead to another sell-off, I believe the fundamentals can support a longer-term fair value of (or above) S$3.25/$24.50.

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Global Logistic Properties Could Be Gone Soon

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