- Secular trends continue to support the group's business model
- Net capital investments and land bank purchases point to strengthening prospects
Many of the secular trends that have driven Segro’s (SGRO) full-year performance were in evidence long before the pandemic took hold. But key drivers such as increased digitalisation and supply chain evolution are seemingly tailormade for the property group’s commercial offering.
The positive outlook on prospects is reflected in a hefty net capital investment of £1.3bn and £77.9m of new headline rent, while 1.2m square metres of development projects are either under construction, or are in “advanced pre-let discussions equating to £81 million of potential rent, of which 75 per cent has been pre-let”.
Adjusted earnings were 16.3 per cent to the good, largely down to a 10.3 per cent increase in the valuation of the portfolio and further development gains. Soumen Das, Segro’s chief financial officer, pointed to the “surge in online retail during the coronavirus pandemic”, but demand for industrial property has been rising steadily as companies have been in the process of truncating and reorganising supply chains to make them more resilient.
The group allocated £603m towards targeted acquisitions and another £817m on development capital expenditure and building the land bank. The development outlay for 2021 is expected to exceed £700m.
Segro now trades at a 24 per cent premium to NAV, but it may be worth meeting that price given the extent of pre-let agreements on its books and a rent collection rate of 98 per cent – a figure that many peers in other less favourable areas of the property market could only dream about. Buy.
Last IC View: Buy, 922p, 21 Oct 2020
|ORD PRICE:||976p||MARKET VALUE:||£ 11.6bn|
|TOUCH:||975.6-976p||12-MONTH HIGH:||997p||LOW: 642p|
|DIVIDEND YIELD:||2.3%||TRADING PROP:||£52m|
|PREMIUM TO NAV:||24%|
|INVESTMENT PROP:||£10.7bn*||NET DEBT:||24%|
|Year to 31 Dec||Net asset value (p)||Pre-tax profit (£bn)||Earnings per share (p)||Dividend per share (p)*|
|* Includes £1.42bn investments in joint ventures|