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Summary of Emerging Strong Players in China's Warehouse Sector

Core Content

This document outlines the growing importance of the warehouse sector in China, driven primarily by the rapid expansion of e-commerce and third-party logistics (3PL). Despite significant investments in recent years, modern logistics facilities remain scarce, with only 11% of China's warehouses meeting global standards. The sector is expected to see continued growth due to increasing demand from e-commerce and 3PL players, as well as the need for better logistics infrastructure to support the evolving retail landscape.

Main Points

• Growth Potential: The warehouse industry in China is immature and has high growth potential due to the e-commerce boom.
• Supply Shortage: Modern warehouses are insufficient to meet demand, with only 1.9% of the total warehouse supply controlled by the top 10 players.
• Key Drivers:
  • E-commerce: Expected to grow at a CAGR of 27% to reach Rmb7,300bn in 2018.
  • 3PL: Includes LTL and CEP services, which are growing rapidly due to e-commerce expansion.
• Cap Rate Compression: Due to supply shortage and rising demand, cap rates are expected to compress, leading to higher capital values.
• Success Factors: Access to land, low-cost funding, talent, and tenants are critical for success in the sector.
• Investment Outlook: Several companies are highlighted as top picks for investment due to their strategic advantages and growth potential.

Key Players

• Chiwan (200053 CH): SOE-backed, owns Blogis with the second-largest warehouse land reserve and potential for B-to-H conversion.
• Beijing Properties (925 HK): SOE-backed, focusing on cold chain and bonded logistics, with a strong tenant base.
• China South City (1668 HK): Dominant in trade mall business, with access to land and strong logistics properties business.
• China Fortune Land (600340 CH): Focused on industrial parks and trade malls, generating warehouse demand.
• Vanke (2202 HK / 000002 CH): Strong growth potential in logistics business, with presence in 60 cities.
• GLP (GLP SP): Leading player in China, with a strong market position and potential for expansion.
• Mapletree (MLT SP): Also a leading player, with a focused strategy and good growth prospects.

Valuation and Recommendations

Emerging China Players

• Chiwan (Blogis): SOE-backed, with a strong tenant base and land reserve.
• BPHL: SOE-backed, focused on cold chain and bonded logistics.
• CSC: Strong in trade mall business, with access to land and growth potential.
• CFLD: Focused on industrial parks and trade malls.
• CMSTD: SOE-backed, with access to land within its jurisdiction.
• Wuzhou: Flexibility in using land in industrial parks for warehouse purposes.

Strategic Focus and Growth Potential

• Focused Strategy: Companies like Chiwan and BPHL have shifted their focus to warehouse investment, similar to GLP's earlier strategy.
• Vanke: Exceptional due to its presence in 60 cities and potential for warehouse spin-off.
• Rural E-commerce: Holds significant growth potential, with online spending expected to rise rapidly.
• Infrastructure Development: Improvements in rural payment channels and logistics facilities are expected to boost rural e-commerce and, in turn, warehouse demand.

Conclusion

The warehouse sector in China is poised for substantial growth, driven by the e-commerce boom and the expansion of 3PL services. Companies with access to land, low-cost funding, and strong tenant relationships are likely to succeed. Chiwan, BPHL, CSC, and GLP are highlighted as top picks due to their strategic positioning and growth potential.