Global Logistic Properties (GLP), which recently made two significant acquisitions in China, plans to expand further in China and Japan as well. Analysts, however, say that managing assets across two of Asia’s largest markets could pose a management challenge.
Shares in GLP closed almost one per cent higher yesterday, a day after the firm, partly owned by the Government of Singapore Investment Corp, said it would acquire a 53 per cent stake in Airport City Development, developer of the Beijing Capital International Airport’s cargo handling area.
GLP, which raised $3.9 billion in October in Singapore’s biggest initial public offering since 1993, last month announced the acquisition of a 19.9 per cent stake in Shenzhen Chiwan Petroleum Supply Base. Shenzhen Chiwan is the parent company of BLOGIS, which is the second-largest modern logistics facility provider in China after GLP.
Mr Jeffrey Schwartz, chairman of GLP’s executive committee, said after the IPO the company has enough cash to expand and more will come in with cargo demand at Beijing airport expected to grow 15 per cent annually for the next four to five years.
“The two additions we made … we are now at approximately 50/50 NAV between Japan and China. Obviously we think that China with the growth, with the population there will be a much larger market for us but we are still very bullish on the Japan market given the critical lack of high quality distribution facilities that are in Japan,” Mr Schwartz said.
Analysts see the acquisitions as a positive for the Singapore-listed warehousing and logistics company as China’s air and sea cargo business continues to grow at a rapid clip. They said that GLP’s ability to quickly enter into such politically sensitive deals bodes well for investors in the long term as it means the firm might be able to land similar assets in future, too.
However, Mr Roger Tan, head of research at SIAS Research, said managing geographically spread-out assets could be a challenge. “I think if they were to go on an expanding their assets, internally they would face management issues,” Mr Tan said. He said GLP would have to figure out how to manage those assets from a single location and who would manage those assets.
“The other challenge is that once your assets are in place, you are not the only player in the area. How do you compete with your competitors,” he said.
Source : Today – 6 Jan 2011