Global Logistic Properties:Intends to maintain IG rating

GLP bonds have tightened 15bp in the past month. They still look cheaprelative to similar rated China property peers (Sino Ocean Land 2024s @185bp, Longfor 2022s @ 160, China Jinmao 2022s @ 155) and higher ratedglobal comps (Prologis 2025s @ 70bp, Goodman Group 2028s @ 130). We seefair value closer to Sino Ocean Land, implying around 20bp potential upside.

    Our base case remains for the ratings to end up at Baa3/BBB, possibly with anegative outlook from Moody’s. Just in case Moody’s takes GLP to Ba1 andthis becomes a crossover credit, spreads could widen by about 15bp, lookingat Shimao 2022s @ 220bp. Key downside risks are rating downgrades lowerthan our expectation, lack of transparency post privatization, continuedaggressive growth appetite, rising contribution from financial services, etc.

    Please see our initiation report from Oct 12, 2017 for more detailed views.

    Earnings call takeaways: Biggest takeaway for us was management’scommitment to maintaining IG ratings