Supermarket Income Reit Share Discussion Threads

[spectoacc] 19/4/2023 08:15

Food just isn't coming down, and climate change may make it a longer term problem.

OPEC also seem determined to keep oil up.

But inflation will come down in time, it has to.

ZIRP is over tho. Someone needs to let the IMF know.

[williamcooper104] 19/4/2023 08:07

19 percent food inflationThat's basically 15 years inflation in one year - wow

[scruff1] 19/4/2023 08:04

Could have done with the economists being right for once with their inflation predictions. But pigs dont fly so down we go before going down again on Friday. Ah well zzzzzzzzzzz

[trikytree] 05/4/2023 22:29

I wanna try too

[nickrl] 05/4/2023 21:27

@chucko they entered into that swap in the full knowledge that the JS JV was going to wound up which was going to result in a big cash inflow so could end up over hedged if they go down the debt reduction route. Anyhow a maintained 6p annual divi needs c75m and that isn't covered from the current 95m NRI after op cost and interest charges even with the annual inflationary increase would be several years. However, clearly the opportunity is surplus cash from the JS JV which i reckon to be 220m which is what changes the above assumptions although exactly when they will decide between debt reduction, acquisition or share buyback remains to be determined but guess they will keep it on deposit somewhere so coverage will be restore quicker. Definitely a HOLD but as im currently not a holder happy for Shore Capital to boot it to the top of my watchlist.

By the way Atrato will receive £7.5 million performance fee from the JS JV sale so they've done alright.

[chucko1] 05/4/2023 19:26

Nickrl, the simpler explanation is that they saw rates going higher!

Everything else is tangential - the fact that the £41mn was paid means they have an offsetting asset on the balance sheet through in-the-money swaps. No change in NAV. However, they amortise this asset over its life using standard treasury accounting methods which has approximately the same effect as paying the higher rate. All that said, they can afford the dividend for the next four years or so and then it's a trade-off between direction of rates and rate of increase/decrease in inflation.

The key thing here is to evaluate the probabilities of the different rate/inflation paths. If we have 3-4% inflation over the next 4 years and stable rates (by definition as all is fixed), I'm fine with a 7%+ yield. It's what happens thereafter - continuing stable rates at 4% with 3% inflation (1% real rates) just about works, but there are other paths which are possible, some of them being beneficial and others not so. The key personnel at Atrato are quite capable of making a decent fist of evaluating this, and in the meantime, I assume they will be adding value via incremental development of some of the sites.

Literally none of this examined in the Shore analysis.

[chucko1] 05/4/2023 19:04

Got it!

I'm not as stupid as I sound.

[nickrl] 05/4/2023 17:48

Personally i agree with Shore Capital on shelling out 41m to protect the unsecured facility. Yes they've got a lower rate fixed for the loan life but it was SONIA+1.5% prior to being fixed at an avg of 2.6% vs 5.78% un protected at current SONIA rates for four years. So wont take much of a drop in rates to be out of the money but guess they wanted full protection or perhaps their advisers were at the opposite end of the spectrum to those employed by Aberdeen!

[jonwig] 05/4/2023 15:02

Spec - ✔️.

Almost all comment functions in the press don't need this, you just comment away, and do whatever formatting you want. ADVFN is an exception. ADVFN has another annoying feature - if you copy a link, it may zap it if it's on their "competitor " list.

[chucko1] 05/4/2023 14:59

I once had a vacation job coding in APL at IBM. I think I will have to practise on some totally unread board to avoid my blushes.

My ignorance is deeply shameful.

[spectoacc] 05/4/2023 14:52

Test

Hope no one noticed that took 5 attempts.

[jonwig] 05/4/2023 14:51

chucko - it's html language. If I showed you in detail, the post would be ruined by using html symbols to explain html!

I'll try though.

To put SOME TEXT in bold, type this: [B]SOME TEXT[/B]. or italics [I]SOME TEXT[/I] except don't use [ and ], use < and >.
For pictures it's more involved. Google "img src". Can come back to you.

[chucko1] 05/4/2023 14:37

And if someone does know, can they also give guidance on how to post things like pictures, make things bold and/or italics.

Regrettably, there appears to be a correlation between peoples' ability to do this and the stupidity of their posts. But it's only a correlation, not a result of. We can try and buck that trend.

[cwa1] 05/4/2023 13:28

Slight tangent here but I wonder if anyone can help? I would have posted some of the text from the Twitter post above on here-but I'm not sure of how to do it as it seems to be an image which text can't be copied from. Is there an easy, not TOO technical, way of doing it? I'm on a laptop if that makes any difference!

Cheeers

[chucko1] 05/4/2023 12:57

Hilarious - the 13.3% fall "comes as a surprise" - so that is the reason for a SELL. Rather than analysing how the fall came about, which is front and centre of a lot of investors' thoughts (wrongly, but that's a whole different story).

There is a comment about the £41mn to "protect the dividend - a high price". Really? It is to keep a low 4 year swap rate on £380mn, thus being 10mn a year or 0.8pps. This should be compared with:

a) the 3.7% rise in rents expected (currently being achieved) per annum
b) a fall in inflation to below 4% would likely imply that interest rates were lower hence revaluing the NPV of the expected income stream. Timing of these issues is important, but well beyond the analytic capability, it seems, offered in the note.

[spectoacc] 05/4/2023 12:31

Income vs finance costs, fine, but then going on about the grocery market - SUPR doesn't sell groceries, and the likes of Tesco, SBRY aren't going anywhere (IMO).

[cwa1] 05/4/2023 12:25

Some detail here:-

[oiltakeyouhomeagaincaitlin] 05/4/2023 12:25

And there we have it: the three top money-losing trolls on ADVFN, jonwig, chucko and spectoacc. They have no idea what's going on around them. Too arrogant!

Reminds me of Belshazzar's feast. "Mene, mene, tekel, upharsin".

Chucko will possibly know what that means. Jonwig and specto won't, though. They're too thick. LOL

[spectoacc] 05/4/2023 12:10

Can surely only be on valuation grounds, but NAV really isn't that relevant a metric atm.

[jonwig] 05/4/2023 12:05

I'm stumped - the words suggest "Hold", he hasn't nailed the sell reasoning, unless he's suggested a switch to some of the others.

[chucko1] 05/4/2023 11:55

What is below was written by the analyst at Shore Capital on or about March 30th. This morning, Shore Capital published a SELL notice on SUPR.

Anyone care to join the dots??

It cannot be interest risks alone as the same analyst has BUY notices on the warehouses and actually on RGL and AGR.




Supermarket Income REIT PLC (LSE:SUPR, OTC:SUPIF) results were “resilientR21; and while the grocery market is currently under pressure from squeeze on the UK consumer, the “long-term fundamentals look appealing”, broker Shore Capital said.

Interim results from the real estate investment trust showed EPRA earnings of 2.9p per share, which Shore Cap noted was a shade below its 3.0p forecast.

The dividend was maintained at 3.0p per share, which was in-line with estimates.

SUPR had already reported that the direct portfolio valuation declined by 13.3% to £1.625bn over the half-year period, representing a net initial yield of 5.5% and translated into an EPRA net tangible assets of 92p per share, down 20% from 115p reported from last June.

“This fall in valuation is consistent with the trend across the sector (to a greater or lesser extent) and is a direct consequence of the outward movement in bond yields and re-pricing of real estate risk in response to the autumn mini-budget,” said Shore Cap analyst Andrew Saunders.

A partial consequence of the fall in valuation and increase in drawn debt, saw the loan-to-value ratio increase to 40% from 19%, although this will reduce to below 30% in the second half following receipts of proceeds from agreed disposals.

“The UK grocery market remains structurally robust with a constrained supply of high-quality superstore assets. While the trading environment is currently challenging due to compressed volume demand from a squeezed mass-market consumer and operating cost inflation, the long-term fundamentals look appealing in our view,” Saunders said.

“We like the investment proposition with SUPR and believe there are appealing long-term attractions with the scaled ownership of UK grocery assets.”

He plans to trim his full year NTA forecast closer to 90p, suggesting the stock is trading on around a 4% discount, “which looks fair in our opinion”.

Analysts at Liberum noted the outlook statement remains optimistic, citing strong operator performance, and that supermarket yields now fully reflect current economic conditions, though supermarket property values have declined at sharper rate than the MSCI All Property Index during 2023.

[chucko1] 30/3/2023 17:25

"Discount to Ruperts post-lunch red book valuation - just not that a relevant metric"

I am not too sure how many more times this needs saying, but the fact that alleged "professionals" still keep trotting out this nonsense is what leads to decent opportunities.

There was nothing new in the just finished Investor Call, suffice to say that they are entirely comfortable with the balance sheet and the hedging just completed. They made specific mention of the 3-4 year hedging, referencing the shape of the GBP YC. They also made mention of inflation swaps, somewhat en passant, but this indicates they may be thinking along the lines of a calculation I presented here a couple of weeks back (not that I am surprised given their alma mater - the GS FICC group).

One graph they updated - the yield history of supermarkets relative to that of other property classes suggests that the yield shift on supermarkets was particularly savage. But as I say, this is what you want when you have a suitable time frame - now longer than it was!

I added, as, it turns out, did two insiders.

[williamcooper104] 30/3/2023 15:53

It's useful in that if the share price is trading ahead of NAV (and NAV is broadly right) then possible to get external growth from raising equity - eg positive cost of capital arbitrage between private and public markets

[williamcooper104] 30/3/2023 15:46

Eg - what's Alton Towers worth in the current market Only way to know is put it on the market Otherwise easy to be wrong by 20-30 percent

[spectoacc] 30/3/2023 15:46

Agreed. NAV relevant for debt covenants, but otherwise an entirely moveable figure.