points: - Robust rent collection rates
- Disposals have been at a significant premium to carrying value
- Rising rents
- NAV has been rising
- Tenants benefit from the shift to e-commerce and even helped by the pandemic
- Increase in dividend
- Managed to extend its credit facility
points: - Premium valuation
Segro is a REIT and owns and develops industrial properties along with warehouses in the UK and Europe. Buoyed by strong performance from its tenants which include the likes of Amazon who are benefiting from the accelerated shift to e - commerce diluted eps stood at 110p from strong rent collection along with significant portfolio valuation uplifts.
Diluted NAV per share stands at 897p which compares to the share price of 1245.5p meaning that it is trading at a 39% premium to NAV . This appears to be warranted keeping in mind in the recent interim results vacancy rates stood at a mere 4.3% and many of the tentants 83% have decided to remain tenants at Segro. The REIT also boast a clean with the first material levels of debt only coming due in 2024. Rent collections also easily cover the cost of interest on the debt.
So whilst Segro’s hefty premium can be justified as a result of stellar performance from itself and its tenants and a clean , it is difficult to envisage a scenario where the premium will expand further or the portfolio uplifts will carry on at the current rate. The recent disposal of Italian warehouses at material premiums to carrying value amply demonstrates how the premium is warranted, but personally I cannot see Segro’s surge carrying on for much longer. 1250p seems like a fair valuation current price 1245.5p 8th of August 2021. HOLD
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