Global Logistics Properties (GLP), the largest integrated logistics property developer in Asia, aims to raise about $500m via the issue of perpetual capital securities to fund its operations. This comes with guidance that the notes will be priced to yield "mid- to high-5 percent", certainly a boost to investors who are seeking for a higher return in the low yield and inflationary environment.
Perpetual bonds have no maturity and issuer will continue to pay the coupons indefinitely, though they reserve the right to redeem the bonds.
Is that the only reason for the perpetual to sell like hot cakes? We suspect not. GLP has a strong business presence in its core markets of China and Japan. Their earnings are expected to grow on the back of a strong China market and gradual recovery of the Japan market. Moreover, it counts Singapore sovereign wealth fund, GIC, as its major shareholder (51%).
Currently, GLP is trading at a 20% discount to RNAV and at more attractive multiples than its logistics peers, with catalysts from higher rents, accretive capital deployment and potential asset spin-offs. The cash flows derived from a policy-friendly logistics property sector render it a more desirable investment than residential developers at this moment.
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