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St Modwen targets jump in logistics assets

Management plans to sell non-core strategic land assets, resulting in housebuilding and logistics accounting for 90 per cent of the portfolio
St Modwen targets jump in logistics assets
  • Housebuilding completions recover during the second half, 25 per cent growth targeted this year
  • Around 1.5m square feet of logistics space due to be delivered in FY22

St Modwen (SMP) is attempting to cut the influence of its strategic land and regeneration business, which forced the group into a pre-tax loss during the 12 months to November. 

“All of the disposals are about getting strategic land back to what it says on the tin,” said newly installed chief executive Sarwjit Sambhi. That means disposing of non-core retail assets and focusing on sites that on feed the logistics and housebuilding pipelines.  

Those pipelines are large enough to grow housing completions and the size of the logistics portfolio each by 50 per cent over the next three years, said Sambhi. A further 1.5m square feet of logistics space will be completed this year, around a third of which is pre-let or under offer. Management expects housing completions to jump by a quarter this year and hopes increased scale will boost margins to between 16 and 17 per cent by 2023. With the portfolio value holding steady since the end of May, a 14 per cent discount to forecast NAV looks attractive. Buy. 

Last IC view: Hold, 345p, 22 Jul 2020

ST MODWEN PROPERTIES (SMP)   
ORD PRICE:398pMARKET VALUE:£886m
TOUCH:396.5-398p12-MONTH HIGH:539pLOW: 294p
DIVIDEND YIELD:1.3%TRADING PROPERTIES:£42.4m
DISCOUNT TO NAV:7%NET DEBT:31%
INVESTMENT PROPERTIES:£914m*  
Year to 30 NovNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201643167.024.16.0
201745170.326.96.28
201847072.427.17.1
201948458.922.83.6
2020428-139-54.75.0
% change-12--+39
Ex-div: 11 Mar   
Payment: 8 Apr   
*Includes investments in joint ventures