Performance review

The amount available for distribution in the second quarter of 2022 meets market expectations.

CICC GLP warehousing and Logistics REIT announced its results for the second quarter of 2022: operating income at the fund level was 87.94 million yuan, down 5.5% from the previous month; profit before interest, tax, depreciation and amortization was 57.55 million yuan, down 9.3% from the previous month; and the amount available for distribution was 70.57 million yuan, an increase of 4.3% over the previous month, which was in line with market expectations.

The adjustment of single tenant leads to a marginal decline in the rental rate. At the end of the second quarter of 2022, about 80% of the assets held by the fund were renewed to the lease area of the period, and the average occupancy rate at the end of the period decreased by 3.77 percentage points to 94.56% compared with the end of the first quarter (mainly due to the expiration adjustment of a single tenant of GLP Tongzhou Optical and Mechanical and Electrical Logistics Park, and the rental work was affected by the epidemic, the occupancy rate decreased from 98.05% at the end of the first quarter to 36.95%). During the period, the income of infrastructure projects at the company level totaled 75.67 million yuan, down 5.6% from the previous month, and the marginal rate of net interest before interest, tax, depreciation and amortization fell to 69.83% (72.07% in the first quarter of 2022).

The performance of the fund recorded steady growth. The total income at the fund level in the second quarter of 2022 was 87.94 million yuan, down 5.5% from the first quarter; the net cash flow generated by operating activities was 48.53 million yuan, compared with 73.33 million yuan in the first quarter; and the amount available for distribution was 70.57 million yuan. Month-on-month growth of 4.3% (mainly due to the expenditure reservation adjustment of various management fees), the cumulative amount available for distribution in the first half of 2022 was 138.23 million yuan (equivalent to 55% of our annual forecast).

Trend of development

Pay attention to the progress of rental work in the short term, and the medium-term dimension suggests that we should pay attention to the potential of fund-raising. At the end of the second quarter of 2022, the occupancy rates of GLP Beijing Airport Logistics Park and Tongzhou Optical Machinery and Electrical material flow Park fell to 93.72% and 36.95% respectively (95.22% and 98.05% at the end of the first quarter, respectively). In the short term, we suggest that investors actively pay attention to the progress of rental work and the impact of the vacancy period on asset performance. In the medium-term dimension, we believe that CICC GLP warehousing and Logistics REIT is the first batch of public offering REITs products with good potential for expansion (by the end of the third quarter of 2021, the total floor area of GLP's warehousing and logistics facilities in China is about 4781 million square meters), we suggest that investors actively pay attention to the follow-up revision of the rules and the progress of the implementation of the actual expansion.

Profit forecast and valuation

Keep the forecast of the amount available for distribution of the fund in 2022-2023 unchanged, the holding rating and the 12-month target total yield of 5.2% unchanged, corresponding to the expected dividend yield of 3.26% and 1.95% price upward space (we give the fund a fair price of 1.2 times NAV at the end of 2022). We are still optimistic about the allocation value of warehousing and logistics targets.

Risk.

The quality of asset management has declined; the capitalization rate of warehousing and logistics assets may rise due to the faster-than-expected pace of overseas interest rate increases; and the worse-than-expected deterioration of the epidemic has led to lower-than-expected contract renewal in 2022.