Asset Play In Value Investing
Asset Play is another value investing strategy which requires more patience and value investing acumen. The value investor will need to identify such undervalued stocks or spot the unpolished gems in the stock market. He or she should be able to hold them for a longer period of time and to sell them off at a great profit when they privatise or delisted from the stock exchange. The waiting time could be long. Global Logistic Properties (GLP) is one of such GEMs in my opinion.
While it is good to always focus on dividend stocks for recurring income, asset play stocks can form another smaller part of your overall stock portfolio. I started to accumulate GLP stocks between late 2015 to June 2016. I only have one such stock in my present stock portfolio operating a global business in warehousing services.
Why I Consider Global Logistic Properties Is An Asset Play Stock?
- GLP is a global logistic and warehousing service provider leader with modern logistic properties which have a total of 57 million SQM in size. Its commitment to be the world largest warehousing service provider is consistent and evidential. There is no doubt that GLP has a strong economic moat.
- It has a strong network with properties locating in 117 cities of China, US, Japan and Brazil.
- It has key customers such as Amazon, JD and Alibaba. The announcements of leasing agreements to different key logistic service providers indicate its on-going potential of achieving more stable income.
- It has a stable revenue income stream for the past 10 years with a major income stream coming from China’s booming ecommerce market.
- The largest investor is GIC Singapore.
- It has a stable and capable management team.
- From financial analysis, it met my target price to book value between 0.75 to 0.8 at the point of market entry and some other valuation criteria.
It might be obvious to understand why GIC had requested the management of GLP to unlock the shareholders’ value. Although the dividend for past years had been quite stable, it is still not a good dividend stock. I will not consider GLP a growth stock because its past stock price performance did not provide me any clear clue. My objective of investing into this stock back in late 2015 was strictly coming from an asset play investment perspective.
It was announced on early February 2017 that GLP had received several non-binding bid proposals from various consortiums. These bidders include Blackstone Group, Warburg Pincus and Beijing Hopu Investment which is related to its own senior management.
The waiting for the result of the bidding proposals is just like a student waiting for his PSLE result. As a value investor, this is an exciting moment for me. If the privatisation offer does come true, this may be one of the biggest ever buyouts in Asia Pacific. I will be more than happy to unlock the value of being a shareholder of GLP for a holding period of over a year or so.
Wishing all the investors of GLP good luck too. We are all in the same boat. My guess for its successful bid price would be around $3 to $3.25. Huat Ah….
When this post is published on 25 February price, the stock price of GLP (SGX: MCO) is closed at S$2.75 on 24 Feb 2017. The current price to book value may not be attractive anymore and the result of the acquisition/privatisation offer has not been officially announced by GLP yet. This is only for information sharing and please do your own due diligence before committing to any stock investment.