Supermarket Income Reit Share Discussion Threads

[m_kerr] 25/5/2023 22:18

a share buyback (save the 6% stamp duty and costs), to bring leverage up and cover the dividend would be the most efficient use of the disposal proceeds.

worth remembering that going from 130p down to 78p represents a massive derisking of the stock. another 40% share price fall would leave the yield at 13%, a 20% fall would leave a yield of about 9.5%. lots of negative news swirling about but you usually have to pay a high price to get a cheery consensus, when objectively the risk of losing money is highest.

[hindsight] 25/5/2023 17:42

I have always thought to control inflation resi needs to crack, mild 1990s
Amazed how well its held up but hearing of cracks and thats without the latest yield shift
Have never liked these, were swamped with retail money and feared did bad buys to use it. However that has long been discounted but will get on board if see 75p

[williamcooper104] 25/5/2023 16:43

Yep core going from 6.2 to 6.8 was the shocker Interesting that the correlation between higher gilts and higher sterling is breaking down implying recession being priced in A recession which will bring back yields/gilts

[williamcooper104] 25/5/2023 16:23

I'm at 10 percent unlevered and about 13 leveraged with a risk of a 5-10 percent divi cut when the debt refinances in a few years; a 5 percent cut is unlikely to happen as would probably just be a few years uncovered

[chucko1] 25/5/2023 16:20

They got hammered last year, whereas SUPR did not get too badly affected. It was always a risk that it might play catch-up.

IL Gilts now at a real yield of +100bps in the long end.

[riverman77] 25/5/2023 15:42

SUPR seems to be highly correlated to index linked gilts and these are getting hammered.

[cc2014] 25/5/2023 15:41

hmm. There must be some people in pain now with this one. The selling is relentless and it seems since the share price lost about 79.5p the buyers have really dried up, possibly waiting for the next psychological point 75p?

Is 78p a good price or a bad price. I really can't figure it out.

[1knocker] 25/5/2023 12:21

I bought these a good defensive bet at 100p !! How low can they go?

[williamcooper104] 25/5/2023 10:57

LGEM (must be one of largest holders of gilts) saying they won't buy long gilts won't be helping Quite why they're saying that publicly when they're vulnerable to LDI blow ups - perhaps a bit of bond market vigilantism

[cc2014] 25/5/2023 10:04

There is something we are missing here. The recent price decline is more than just a sell-off on the basis of rising interest costs.

The volume going through is too large.

[m_kerr] 24/5/2023 21:50

i believe the implied yield on the supermarkets is now about 6% which is roughly where these assets are trading at, so the trust is trading at 'market value'.

with gearing and inflation at 2-3% p/a, you get an IRR of about 10% here. i think over the 14 year weighted lease term investors will get a very good risk adjusted return. tesco and sainsbury's have strengthened their balance sheets in recent years, and will likely continue to do so.

it's a contractual income stream, from investment grade tenants who are essential, non discretionary retailers. and simple straightforward triple net leases. alot to like....!

however worth mentioning that SUPR have been responsible for 20% of the total supermarket transactions by value since IPO. it was like a successful open ended fund that buys more of the stock they hold, driving performance higher, and inflows higher still. i would not count on yield compression that was a key driver to returns in the years prior to the mini budget.

[cwa1] 24/5/2023 15:27

I put an 80p limit order on for some SUPR a few days ago and, slightly to my surprise, it has just been trigered :-/ Now I'm wondering if I wasn't ambitious enough with my price limit...

Still I've got it on a 7.5% yield-not as ambitious as some, clearly-but not too bad assuming they at least hold it-which I think they will.

Oh well, interesting times!

[chucko1] 24/5/2023 12:00

1. It is basically covered. They have the flexibility to use the Sainsbury proceeds as they see fit, and the current market volatility increases the value (slightly) of this flexibility. If they want to have a 100% covered dividend, then they can do so. It's what it all looks like in around four years that is more the question.


2. Waiting for 8% may mean you miss 7.8%. And the 7.4% you get while waiting is not insignificant.

With a moderately large holding on SUPR, but not anything like I used to have, total return is all that fusses me given that transient highs and lows have become unimportant. Unless the yield curve bear steepens, this should continue. Expect Peak rates to be higher than my previously forecast 5% and for longer, so the MM funds will readily take the strain of the REIT MTMs.

[nickrl] 24/5/2023 11:27

@specto yes not inflation proofed but when you can buy in at a decent yield (needs to be >6%) and have some certainty that the renetal revenue stream is at least protected then surely its like investing in a fixed rate savings account albeit capital is at risk. My problem with SUPR is divi is far from covered currently but teh trajectory on rental income could move it into that space albeit might take a couple of years hence i want 8% to give me a bit more coverage here.

[spectoacc] 24/5/2023 11:14

Fail to see how it's doomed, particularly post-JV cash, but this is a readjustment to the risk-free.

All these "inflation-protected" REITs were always talking bunkum - inflation 8.6%, rises capped at c.4%, in the vast majority of cases. So the longer inflation is up, the more the rent (relatively) slips behind.

Better than no increases, yes, but you'd rather be the tenant than the asset owner.

On getting the share price near to NAV - they may achieve that without the share price rising..

[williamcooper104] 24/5/2023 10:21

Buying assets with debt doesn't increase the management fee Increasing size of the NAV does - and best way to do that is to raise equity which is much easier to do when the share price is at a premium So they very much do care about the share price - quite apart from they take a big chunk of the man fee in equity Gilts are getting killed - so so are gilt/linker proxies No great surprise

[1c3479z] 23/5/2023 20:50

too busy taking on assets and loans, since presumably their management fees are linked, to pay much attention to the share price?

[nickrl] 23/5/2023 19:31

@scruff they need 75m to cover the 6p divi along with nearly 20m interest charge let alone inv mgt fees and other expenses so its another one where the divi is running way ahead rental income. However, they do have two more instalments to come from the JS JV sale which could be used to cut debt, buy more income producing assets or do a share buyback. SUPR say they will update what they are doing with the cash in July.

Certainly fallen from grace here but if it gets over 8% may take a few as majority of its tenants are solid.

[scruff1] 23/5/2023 19:10

A new all time low I think and achieved in a pretty quick and unrelenting trajectory. Not very promising. My other reits have at least a pulse

[nickrl] 22/5/2023 18:23

New ATL today yield now 7.23%.

Waiting on update about which way forward with the rest of the JS JV cash.

[scruff1] 19/5/2023 13:24

Yep read the RNS later. I was assuming from the HL SUPR alert heading on my phone