ii view: Tritax sees record demand for logistics space

What's not to like about exposure to growth in e-commerce and a dividend yield of over 3%?

Full-year results to 31 December 2020

• Adjusted operating profit up 20% to £147.5 million
• Adjusted earnings per share up 8% to 7.17p
• Headline Net Asset Value (NAV) up 13% to 169.92p per share
• Fourth-quarter dividend of 1.7125p
• Total dividend down 6.5% on 2019 to 6.40p per share (2019: 6.85p)

Chairman Sir Richard Jewson said:

"Despite the challenges presented by Covid-19, Tritax Big Box built significant momentum in 2020 as the benefits of complementing our strong investment portfolio with our development land bank begin to crystalise. This progress was evidenced in the Group's strong performance during the year, with extensive letting activity on our development portfolio, increasing values through asset management and the successful recycling of capital. In addition to these active steps that the Manager has taken, we have seen a strengthening in the UK logistics market driven by heightened occupier and investor demand, which we are well placed to capitalise upon in the coming years."

"We believe the positive structural drivers currently being experienced in the UK logistics sector are at an early stage, and these trends will continue to have a favourable lasting impact on our market over the long-term.”

ii round-up:

Large warehouse owner Tritax Big Box (LSE:BBOX) reported record demand for logistics space during 2020.

Tritax, whose biggest tenant is online retailing mammoth Amazon (NASDAQ:AMZN), flagged an end of year portfolio valuation of £4.41 billion, up from £3.94 billion at the end of 2019. Rents collected grew by over 8% to £180.6 million over the year.

Shares rose by more than 2% in UK trading, bringing their gain over the last year to more than 40%. Shares for fellow warehouse and industrial property owner Segro (LSE:SGRO) are up around 10% and office and shop owner Land Securities (LSE:LAND) are down around 9% over the last year.

Tritax flagged an acceleration in the growth of e-commerce and the increasing need for modern, efficient, and resilient supply chains, both reinforced by the pandemic and Brexit.

Unlike some of its shop and office owner rivals, rent collection stayed strong. A total of 99.4% of rents were collected during 2020. All remaining arrears are expected to be collected in 2021.

A fourth-quarter dividend of 1.7125p per share was declared, bringing the full year total to 6.4p per share. 

Accompanying management outlook comments flagged 37% of its rent roll as being up for review in 2021, giving it the ability to realise income growth through the certainty of fixed or inflation linked uplifts and also through capturing market rental growth. 

ii view:

Tritax’s investment portfolio was made up by 59 assets as at the end of 2020. It has a diversified base of 41 different customers, including Amazon, Morrison Supermarkets (LSE:MRW), Tesco (LSE:TSCO), Ocado (LSE:OCDO), Howdens (LSE:HWDN) and Marks & Spencer (LSE:MKS). Amazon is its biggest tenant, generating nearly 18% of its annual rents, with Morrison next at just over 6%. 

For investors, a share price of around 183p compared to an end of year net asset value (NAV) per share of 169.92p, leaves the shares trading at a premium to the NAV and therefore not obviously cheap. Early pandemic caution meant a 6.6% reduction in the 2020 dividend payment, but a full-year payment of 6.4p per share still leaves the shares trading on a income yield of over 3%. That's not bad in a world of ultra-low interest rates. 

Positives: 

• Exposure to structural change in shopping habits
• Attractive dividend payment (not guaranteed)

Negatives:

• Year-end 2019 net asset value per share down 1.2%
• 7p per share dividend target previously withdrawn

The average rating of stock market analysts:

Buy