Constructive Ideas For Singapore Markets : GLP and MLT

Some readers may have noticed that I pulled the post on the idea of how some bonds could be issued more profitably for some than others. As it turned out, opinions were that it could have touched raw nerves and my self preservation instincts have never been very strong but I do have a strong phobia for the authorities, as well as lizards and reptiles (aka herpetophobia).

Do not ask me to choose which is worse, but I believe you can run away from reptiles. Besides I have been assured that they do not award public service medals for whistle blowing, although my post could not possibly have implicated anyone because it was straight out of my head. Nonetheless, I have no desire to be a dead hero because notoriety is not in my life’s objectives and I note that little people who stick their necks out against big institutions like the reporter in NKF saga (who happens to be an ex schoolmate), really do not gain much in the end.

Therefore I will do as some have suggested, write on constructive themes which is what I will attempt to do today, thereby risking further ridicule that my life must be sorely lacking in excitement to be writing on a weekend as compared to friends who are in Macau for the APPT Poker tournament.

The Ali Baba IPO has been bugging me for a few days and reading up on it, you cannot help but notice some recurring themes and a glaring one has been their plans for the future in which logistics investments feature prominently.

In one Reuters article about the impending IPO, GLP popped up alot which got me intrigued and I did some further reading.

So much for the claims that there is oversupply in warehouse space at the current rate of construction, we cannot view it as reality. Just as half the office space in Singapore downtown is probably not inhabitable by market standards in those dilapidated old buildings awaiting refurbishment, the reality on the ground in China is probably the same.

I have made up my mind about logistics but we do know that the evil twin to e commerce would be the bread and butter retail sector that are making up the tenants in all those mall REITS that we have and I have the perfect explanation for our falling inflation because I am getting sneakers from Aliexpress at a fraction of their price in Singapore. If only we could order our dim sum from China too because after a 6 month hiatus from Crystal Jade, I discovered this morning that there is nothing under 4 bucks on their menu anymore.

The changing face of the Chinese retail landscape towards e commerce is a compelling story.

“So far this year, GLP has built 280 warehouses in China, creating around two million square meters of floorspace, at a cost of $1.2 billion.

While Chinese e-commerce firms like Alibaba already have political clout, foreign investors are teaming with influential local partners to help them buy land.

GLP, for instance, linked up with politically connected deal maker Fang Fenglei’s Hopu for a $2.5 billion deal earlier this year, which also included Bank of China. Since signing that deal, GLP has also established partnerships with China’s largest food and agricultural products supplier COFCO and logistics company Sinotrans.” http://www.reuters.com/article/2014/05/11/us-china-warehouse-idUSBREA4A0AT20140511

The stock price of GLP has bounced quite a bit of late, along with MLT, Mapletree Logistics Trust. Both of them I choose because of their logistics property exposure to China, GLT being the larger of the two.

Both these companies have SGD perpetuals which I recommended to friends last year when their yields broke 5% during the initial market panic on the Fed’s taper.

Both are trading under 4% on the offer side now with call dates approaching in 2017.

GLP 5.5% callable 04/2017 (rated BBB-) was the harder hit bond last year because of its SGD 750 mio outstanding (compared to MLT’s Baa3 SGD 350 mio).

GLP 5.5 PERP YIELD CHART

MLT 5.375 PERP YIELD CHART

It seems that the market has wised up to the the terms of perpetual securities (which is why Cheung Kong 5.125% perpetual is still at 95 cts).

And even at their 4%, or thereabouts, yield there remains value in them perpetual bonds regardless, for the scarcity in the securities for both companies and the fact that folks are willing to fork out almost the same for lesser quality names in the 3 year sector such as Golden Agri and Far East Horizon in recent months.

Yet, I would put GLP stock on watch too, to buy on pullback despite their poor dividend record, along with MLT which is paying a good 6% Reit return. It is a growth story.

Ali Baba will be hitting the streets soon given the poor performance of Nasdaq, as fund managers continue to liquidate to make room in their portfolios for the new benchmark. My personal strategy has never been to go for the top dog in a hot IPO (which was how I managed to buy Facebook at 20 bucks), but to look for the complementary assets. It is like avoiding Tesla, but buying the fuel cells but that is a story for another day.

Wishing everyone a good weekend.