Segro Share Discussion Threads

[jonwig] 26/5/2022 14:29

FT just now;

The UK’s booming warehouse market can withstand a pullback from Amazon, the boss of a leading logistics property developer has said, as ecommerce fuels demand for space.

The ecommerce giant took a quarter of all UK warehouse space leased in 2020 and 2021, but said earlier this month that it had overextended during the pandemic. That announcement wiped about 10 per cent off the value of the largest shed developers in the US and UK.

But Andrew Jones, chief executive of urban warehouse owner LondonMetric Property, said that demand was likely to continue to outstrip supply, thanks to a rush to onshore supply chains and the growth of smaller ecommerce businesses.

More here:

[nexusltd] 16/5/2022 18:52

@jonwig : Agreed. A prolonged recession is a risk to SGRO.

[jonwig] 16/5/2022 18:38

Nor I, but if the ECB goes into tightening mode, it's likely company investment plans (including SGRO's) will be put on hold in the face of recession. So no need for further debt isuance!

[nexusltd] 16/5/2022 18:09

@jonwig : That Italy and others can borrow @ lower rates than they would if not in the Euro currency domain is without question true; and was indeed the prime reason Prodi, Mario Monti & Berlusconi gave to the Italians to persuade them move on from the Lira in the 1996-2002 years. It is likely that the ECB will start quantitative tightening in Q3/4 2022. Euro bond interest rates will rise as a consequence. In the short to medium term SEGRO is insulated from this with its long duration bonds, and interest rate hedges. I'm still not clear as to the foreseeable risks to SGRO's debt metrics.

[jonwig] 16/5/2022 17:39

The ECB's bond buying program has meant some countries (Italy, etc.) can borrow at lower than free market rates.

What would Italy's rates be without this support?

[nexusltd] 16/5/2022 17:14

@jonwig : Indeed, bond buyers view SGRO as a high quality name. What ECB "corrections" are you alluding to & how might they adversely affect SGRO's debt profile?

[jonwig] 16/5/2022 15:46

nexusltd - SGRO can issue debt with a lower coupon than many sovereigns, though the ECB will intervene to make "corrections".

[nexusltd] 16/5/2022 15:18

@m-kerr SGRO LTV 24%, cost of debt March 2022 1.6%, maturity 8+ years. Segro market cap is such that it can issue its own bonds @ advantageous rates. Euro bonds to match continental European assets.

Do you know of any other UK REIT with the debt profile quality I have outlined?

[m_kerr] 16/5/2022 14:55

no surprise at all to me the recent fall. not a great time to be holding property yielding 3-3.5% when the cost of debt is likely to increase substantially in the short to medium term. one of the risks of buying stocks priced for perfection.

[sogoesit] 13/5/2022 03:27

Thanks for comments posted, much appreciated.

Am struggling with this one’s valuation or, more precisely, change in perception of the company.
At opposite ends of scale (valuation/structure) to my AEWU REIT, which has been re-rating recently, it looks out of kilter and way oversold.
Having been long USD this is now looking cheap for accumulation. The dilemma is that sentiment/technicals could take it to the next round number down. Hmmm…

[jonwig] 11/5/2022 14:31

Yup - both SGRO and BBOX have released very strong trading statements recently, then Amazon lobbed a spanner which took the market by surprise.

As the FT article says, Amazon's size in the market can be over-publicised.

[nexusltd] 11/5/2022 13:50

@jonwig . I agree; logistics warehouses have further to go as businesses seek greater security of supply & trade politics / borders become more sharply defined. The markets are supposed to look ahead and at present all they see is recession.

The CBRE data I posted on the CP+ thread today is backward looking; however for April, albeit at reduced pace as compared to March, there have been further advances in capital values and rental income in all sectors including industrials. May's CBRE data will be telling, as Fed and BoE intentions have been made abundantly clear to all businesses.

[jonwig] 11/5/2022 06:03

FT suggests the Amazon effect is overdone:


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The UK market is under-warehoused on a per capita basis compared with other countries. (The US, which starts from a much higher base per capita, is currently building more warehouse space than the UK’s entire standing stock, says Savills).

UK planning makes new space hard to come by: “There is substantial undersupply embedded in the system because local authorities didn’t plan enough in advance or recognise the change in demand”, says Matthew Griffith, director of policy at Business West.

That is all translating into healthy rental growth for developers and landlords. Some big developers won’t quote rents or take offers early in a speculative build to avoid having underpriced relative to market once it completes.

[wskill] 06/5/2022 09:30

Shareprice at around 2021 net asset value with borrowings at 23% of net assets value not a lot of leverage so I picked up a fair few for my SIPP today .
Dont believe that we will go away from online shopping now its only going to grow in the long term.

[jonwig] 03/5/2022 15:06

That's a blow - put down to Amazon's problems with spare capacity.

Unclear whether that means slower development growth for SGRO or worse.

[sogoesit] 21/4/2022 09:53

Construction supply chain and inflationary pressures....

However....

"At the same time, we expect these pressures will further tighten the supply-demand imbalance for industrial assets and place further upward pressure on rents across our portfolio."

[jonwig] 21/4/2022 07:27

Trading Update:



Positive, as always. (Personally, I have fears for recession in germany, spreading to the rest of the EU.)

[nexusltd] 20/4/2022 10:54

Q1 Trading Update tomorrow 21st April.

[m_kerr] 21/2/2022 21:44

i'm not sure - whether the underlying assets are fairly priced or not i don't see how you make a decent return at these valuations. if everyone is very enthusiastic about future prospects and prices it for a long period of good growth, there's nothing left on the table for you. retail parks for instance are yielding 7%, and have traded solidly throughout lockdown.

[m_kerr] 18/2/2022 16:38

3-3.5% yields nowadays in the sector. just 5 years ago you were looking at 6% yields. comparing the figures for rent per square foot, broadly speaking the like for like increases look to be up roughly 10-20% since then (much lower i imagined - it's not a like for like comparison due to changing geographies etc).

so effectively, yield compression alone has an 84% increase in valuation, with rental growth on top providing the further gain. in order to get the same valuation increase again in 5 years time would require the yield to fall to ridiculously low levels - 1.8%.

in other words, i get the feeling that the time to buy into this sector and make good returns has come and gone. a geared 2% starting yield including the increase today is very low indeed.

[income investor] 18/2/2022 10:15

Massive 40% increase in NAV to 1137p caught my eye. All very encouraging!

[jonwig] 18/2/2022 08:29

Not bad, are they!

FT summary:

The popularity of online shopping has driven a near-threefold increase in full-year profits at warehouse owner Segro, as ecommerce businesses seek more space to cope with growing demand.

The London-listed landlord, whose biggest client is Amazon, said on Friday that pre-tax profits almost tripled year-on-year in 2021, reaching £4.4bn as the company lifted rents and secured new tenants.

Segro, whose share price touched a record high last month, said it would increase its full-year dividend 10 per cent.

The FTSE 100 group’s results underline how demand for online shopping has split the fortunes of commercial landlords during the pandemic. While the success of ecommerce has benefited warehouse owners such as Segro, landlords reliant on income from high street retailers have struggled to recoup rents throughout the pandemic.

Segro said it expected strong demand throughout this year, adding that, combined with historically low levels of vacant properties, this should result in higher rents.

[ygor705] 18/2/2022 08:10

Strong increase in both eps and net asset value here plus 10% upping of yearly dividend. Not much to dislike. £15 share price now looking a distinct possibility once the markets stabilise.

[nexusltd] 20/1/2022 11:18

I agree. JPM's is one of many opinions. I posted it because they are fairly influential and they are not listed as an advisor or broker.

[jonwig] 20/1/2022 06:54

Interesting, thanks.

I'd assumed the underperformance was caused by the nav premium being a bit excessive!