Property & Construction Daily

The Property & Construction Daily provides a sector-specific comment from leading analyst Alastair Stewart. His daily perspective provides a round-up of market statements, news, economics and views from the property and construction sectors.

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February 16, 2024

SGRO | Fortnight ahead

Company news

Segro (SGRO, 833p, £10,003m mkt cap)

UK’s leading owner and developer of warehouses and industrial space, also active in Europe. FY (Dec) results. Net rental income +12%, £587m; adj PBT +6.0%, £409m;  IFRS loss before tax, £263m (FY 22, -£1,967m); adj EPS +5.5%, 32.7p; div +5.7%, 27.8p; adj NAV 907p (966p); net debt, £6,016m (£5,693m); LTV, 34% (32%).

Outlook: “Capital market pricing is now implying that interest rates have peaked. If sustained, this provides a positive backdrop for a recovery of investment market sentiment as the year progresses. Take-up levels are in line with or higher than pre-pandemic levels across our markets, supported by the key structural drivers of occupier demand which remain very much in evidence: data and digitalisation, supply chain optimisation, sustainability and urbanisation. This gives us confidence in the outlook for continued rental growth in line with our medium-term guidance of 2 – 6% pa, particularly as supply remains restricted in the near-term due to low levels of vacancy and limited capital availability for developers; and in the longer-term as public policy, particularly in urban areas, continues to favour housing over industrial usage and severely restricts the use of greenbelt land. Our high-quality land bank, with the potential to add over £390m of rental income, provides us with the ability to meet occupier demand through further development. Projects within this land bank, as well as redevelopment opportunities within our existing portfolio such as on the Slough Trading Estate, combine to give the potential for 1.2 GW of new data centre capacity across 24 sites. Our strong balance sheet provides financial flexibility to invest at a time when construction costs are moderating, and supply of new competing product remains low. Development therefore continues to offer a profitable growth opportunity, as demonstrated with improving development yields of 7 – 8%. Overall, we believe the market environment offers an attractive opportunity for profitable mid-term investment, including the ability to grow passing rents by more than 50% over the next three years. Segro is therefore well-placed to deliver attractive returns and continued growth in earnings and dividends”.

Fortnight ahead

240216 P&C Daily – Fortnight ahead
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