Segro (SGRO) provided further evidence that life in the logistics sector of the real estate market is rather agreeable. Much of this is because there was a lack of new construction in the wake of the financial crash. But the subsequent economic recovery and a rise in internet shopping created a significant gap between supply and demand, as retailers looked for big box distribution warehouses and smaller ‘last mile’ delivery centres.
All this has left Segro extremely well placed, a fact underlined by the valuation uplift on its portfolio rising from £81.1m in the comparable first half to £309.9m. New rent contracted rose by 28 per cent to £27.5m, while total net rental income grew by 17 per cent to £103.4m.
To gauge the strength of the market, the current development pipeline is capable of generating £46m of annual rent of which £31m has already been secured through pre-lets. A further £14m are at an advanced stage of discussion which means that the development arm has essentially been derisked.
Segro also bought out its joint-venture partner in the APP portfolio, effectively leaving it with virtually all the cargo and warehousing facilities at Heathrow, a position that would become even more advantageous in the event of a third runway.
Analysts at Peel Hunt are forecasting adjusted net asset value of 525p at December 2017, from 499.5p in 2016.
SEGRO (SGRO) | ||||
ORD PRICE: | 528p | MARKET VALUE: | £5.27bn | |
TOUCH: | 528-528.5p | 12-MONTH HIGH: | 548p | LOW: 385p |
DIVIDEND YIELD: | 3% | TRADING PROPERTIES: | £25.4m | |
PREMIUM TO NAV: | 5% | NET DEBT: | 42% | |
INVESTMENT PROPERTIES: | £6.87bn* |
Half-year to 30 Jun | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2016 | 464 | 201 | 24.8 | 5 |
2017 | 507 | 397 | 41.3 | 5.25 |
% change | +9 | +98 | +67 | +5 |
Ex-div: | 17 Aug | |||
Payment: | 29 Sep | |||
*Includes joint ventures |