Investment suggestion

We give a 12-month target total return of 5% and downgrade the investment rating to hold according to our rating according to the rate of return, but we are still optimistic about the target's long-term investment prospects. The reasons are as follows:

The adjustment of individual tenants led to a slight decline in the overall occupancy rate. The average asset occupancy rate of the seven bids at the end of the third quarter was 96.64%, which was slightly lower than that at the end of 2020 (98.72%). This is mainly due to adjustments made by individual tenants of GLP Beijing Airport Logistics Park (but external managers are already actively negotiating leases with potential tenants). As a result, the occupancy rate dropped to 85.94% at the end of the third quarter (96.85% at the end of 2020). The asset occupancy rate of the remaining six bids remained basically stable compared with the end of 2020.

Operating income and available distribution amount were stable as a whole in the third quarter. CICC GLP warehousing and Logistics REIT announced its results for the third quarter of 2021. In the third quarter, the operating income at the fund level was 87.34 million yuan (we expect the annual operating income to be 370 million yuan), the amount available for distribution was 62.98 million yuan, and the cumulative amount available for distribution since listing (June 7) was 82.41 million yuan, in line with our previous expectations.

It is expected that the full-year operating results will continue to be robust, and the medium-term dimension suggests that we should pay attention to the potential of fund-raising. We believe that the overall asset management of the company is sound, and the annual dimension is expected to achieve the expected performance level of the market. In the medium-term dimension, we suggest that we should pay attention to the regulatory design and promotion of the supporting mechanism for fund-raising.

The biggest difference between us and the market, we believe that CICC GLP REIT has a sound operation, has the ability to achieve long-term and steady growth in the amount available for distribution, and the fair value of the underlying assets is expected to exceed market expectations.

Potential catalyst: the fund announces an expansion or other asset acquisition.

Profit forecast and valuation

Keep the forecast of the amount available for allocation of the Fund unchanged in 2021 and 2022. We expect the projected 2021 annualized dividend yield for today's closing price to be about 3.5% (or about 2% based on the actual 2021 dividend from the listing date). On the fund price side, we believe that the overall upside of the REITs market since the end of August echoes the decline in bond market yields, and investors' attention to the REITs market has gradually increased recently. The current price represents a 15 per cent premium to our estimated fund net assets valuation (NAV) at the end of 2022, which we think reflects that the products are still supported by good demand fundamentals and are in line with the trend of continued capital inflows in the logistics real estate sector of the primary market. Considering the current capital market environment, we believe that the current fund prices are still expected to be basically maintained (this is also a reflection of the equity nature of REITs), but also suggest that investors better balance short-term and long-term returns. In terms of rating, we give a 12-month target total return of 5%. According to the classification of our rating according to the rate of return, we downgrade the investment rating to hold, but we are still optimistic about the target's long-term investment prospects.

Risk.

Asset management performance may be lower than expected; the capitalization rate of warehousing and logistics assets is rising.