Segro is well placed with its industrial/warehouse units to enjoy strong tenant demand at good rental levels. Which in turn on a yield basis of even say a low 6% is way ahead of on the cash market, plus capital appreciation on the bricks and mortar a great long term hold in my opinion.
Happy for you but I've got a massive short on these that is hurting more and more every day. Took the position in a fit of pique because I meant to buy them around 200 a couple of years ago then watched them take off and wanted to believe they had now become overbought. That's probably true but this a quality company, and I guess Aberdeen's new commercial property fund is probably going to pile in at some point. Win some lose some.
Key Takeaways From the September Fed Meeting
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By Harriet Torry
Federal Reserve officials didn't raise short-term interest rates Wednesday, but a December increase remains on the table. Meanwhile, the central bank said it would initiate in October its long-telegraphed plan to shrink its securities holdings. Here are key takeaways from the Fed's two-day policy meeting:
Looking to December
The Fed's summary of economic projections suggests officials are still on track to raise short-term interest rates once more this year, most likely at the Dec. 12-13 meeting when Chairwoman Janet Yellen will hold her next press conference. The Fed meets again Oct. 31-Nov. 1, but no press conference is scheduled then. Fed officials expect to raise rates three more times next year, a forecast unchanged from when they last submitted economic projections in June. Officials lowered their median forecast for the path of rates in 2019: They now expect two rate increases that year, down from three. Officials expect rates to rise once in 2020.
Trending Lower for Longer
Fed officials brought down their expectation for where they see interest rates settling in the longer run, to 2.75% from an earlier forecast of 3%. The drift downward reflects a lowering in officials' view of the so-called neutral rate, an underlying interest rate that is consistent with the economy operating at its full potential and expanding without overheating. Ms. Yellen told reporters that "because the neutral rate currently appears to be quite low by historical standards, the federal-funds rate would not have to rise much further to get to a neutral policy stance."
Will She Stay or Will She Go?
Ms. Yellen is keeping her cards close to her chest regarding what she think about her future as her term as Fed chairwoman ends Feb. 3, 2018. She reiterated Wednesday that she intends to serve out her current term, but said, "I'm really not going to comment on my intentions beyond that." She told reporters that she hasn't had a meeting with President Donald Trump since the early days of his presidency. The two have met just once, for about 15 minutes, in the Oval Office in February. Mr. Trump has said he is considering renominating Ms. Yellen, but that he is considering others for the post as well.
Roll On the Rolloff
The Fed in October will initiate its long-telegraphed plan to shrink the portfolio of bonds acquired after the 2008 crisis. That means the Fed will end its practice of fully reinvesting the principal payments of maturing bonds into new bonds and instead allow $10 billion in holdings to roll off without reinvestment every month. Those amounts will increase by $10 billion each quarter to a maximum of $50 billion from October next year. "Our balance sheet is not intended to be an active tool for monetary policy in normal times," Ms. Yellen emphasized Wednesday, adding that "we therefore do not plan on making adjustments to our balance-sheet normalization program."
Sticking to Its Guns
With the rolloff of its holdings ready to start, Ms. Yellen said there is now "a somewhat high bar to resume reinvestments," and only "a material deterioration in the economic outlook" would prompt the Fed to consider such a move. "It will be up to future policy makers to decide in the event of a severe downturn whether they think it's appropriate to again resort to adding assets to a balance sheet," she said.
Shares in property developer Segro have jumped by 4.4% to a nine-year high after reporting the value of its assets had increased by 5.4% as online shopping boosts demand for warehouses.
Boss David Sleath told the Today programme there was a shortage of good quality warehouse space in the UK.
"Ever since the financial crisis very little space has been build on a speculative basis, that means without a tenant already lined up and all of the space that was empty back in 2007/8 has now largely been taken up.
"So just at the time when retailers are either leading the way, Amazon taking a lot of new space or other retailers are scrambling to try and put in place a distribution network to compete, there's a shortage of space around.
"In some of the big cities like London is land is being handed over to residential developers at quite a rate and outside of the big cities our greenbelt planning laws protect the development of new warehouses there so there is a shortage of good quality land around."
Adjusted pre-tax profit up 23% to £91.2 million in the first half, helped already by the APP purchase. High customer retention rates, a low vacancy rate of 5.5% and decent lfl rental growth of 3.9%. Divi up a fairly miserly 5%.
A new all time high, just as confirmation comes that we're joining the FTSE 100.
When I bought my first few of these 6 years ago, at £3.09, it was almost a contrarian punt, and indeed it carried on dropping, to under £2.50 (when I bought a few more). Now it's a reassuringly dull blue chip paying a decent divi and with the 1-5 rights issue earlier this year (I very sincerely hope the last chance to buy these at £3.45) now makes up almost 5% of my portfolio.
Warehousing is in demand thanks to online ordering. The pressure on suppliers to deliver more and more quickly is leading to drone deliveries being planned. That means warehouses are needed all over the country. SGRO has developed a record amount of new warehouse space lasr year, totalling 422,000sq metres, of which 80% has been let. Over £300m expenditure is being proposed for this year for new developments.
As you probably already know, the placing of £556m rights issue is to be used for the takeover of a portfolio of 21 properties, which are mostly situated at Heathrow airport.
I have purchased a few SGRO yesterday for around 464.
Decided to take up all of my rights. Despite the inevitable spike in the price, I'm still marginally in profit thanks to the discount (and c90% up on my original stake a few years ago). Ups my average price a little, but can't complain as there's unlikely (I hope) ever to be any other way of getting these at £3.45 (paying about 5%).
But I'm probably talking to myself since Grey took profits and left.
I'm sure that there are people who know the answer to the following question but I am uncertain.
Clearly SEGRO is a REIT and this seems to complicate dividends with a special tax being applied to some dividends. If my SEGRO shares are held in an ISA what dividend per share should I receive in May?
You might have chosen a good moment. I think I'll hang on in for the results next week and then review - currently over 30% up on my investment, and paying over 5% on the original stake. Not a bad run, but I think there may be more to come.
Grayinvestor - As someone who works in a commercial property business it is not as simple as you paint it. High yielding properties are high yielding for a reason - either too big - too small - wrong place - lack of tenant interest - restrictive leases etc etc etc.
I believe the strategy to be correct - in this business it is all about adding value and less about existing value.
EPRA profit £667.m v £69m. Just about OK.
EPRA EPS 8.9p v 9.2p. Weak.
Divi 4.9p v 4.9p. Weak, but expected.
EPRA NAV £3.33 v £3.12. Good.
LTV 44% v 42%. Adequate.
Rentals income (13%) due to disposals/JV.
Non core properties now 7% of whole. Restructuring broadly over.
Retention rate (of customers) 72% v 75%.
So the management has spent three years restructuring, in the hope of building a better future. It is now firmly time for it to arrive. We need to see strong growth in EPS and mild growth in DPS. It's time to stop selling high yielding properties and buying slightly lower yielding properties. I note that the company has resumed speculative building.
These shares are a hold, but only just. I can see how SGRO could increase the top line by 15% fairly quickly, which should flow through to improved NAV and EPS. This could continue in subsequent years.
Time for some stronger results.
As to these results, I would say that they are slightly ahead of broker expectations which have been set quite low at 16.61p EPS for the year. The actual could be closer to 17.7p, exactly the same as last year.
In general I would say that SGRO continues to be slower on it's feet than HSTN (in which I have a much larger holding), but it should now be ready to make progress. No more excuses from the management...........
For what it's worth, I use T D Waterhouse. The ISA PID reclaims come in pretty quickly but the SIPP PIDs come from the SIPP administrator, which means that they are only reclaimed annually. So the process is a bit clunky.
EPS 17.7p v 19.3p, not great but slightly above expectations
DPS 14.8 v 14.8, not great but expected
NAV 316p v 302p OK, considering dumping some swaps
LTV 42% v 51% Good
Lease length 6.7 years v 6.4 years, unsurprising considering disposals
Net rent (12.3%), not good
£6m net new rentals, flattered by take backs for redevelopment
Vacancy rate slightly up
Rental income £273m v £305m, not great
EPRA profit £131m v £143m
Final divi 9.9p, all PID
Net debt £1.45bn v £2.09bn, good
On dividends, the company intends to increase the divi in the long term ie post the endless restructuring.
So, after several years of restructuring, has the company improved? In my view it has, but not substantially. I would rate the shares as being a 'hold'. It's about time the endless change delivered some noticeable signs of improvement, not least in the dividend. Most of the improvement in the company has come from the underlying market.
The good news is that the company ought to be reasonably stable from now on.
Agree hold even though I also agree sp seems a bit toppy. Income considerations still insist that I hold. At sp 40% up on the year not sure I see the shares as particularly unexciting however. If you do, grateful to know of your exciting ones!
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I am not going to sell my holding even though sp price has gone up 50% to what i paid as I think it will go a lot higher .The debt is reducing and there is a lot of work in the pipeline . When completed these should increase nav and rents significantly .Its a mid to long term share. Sgro is being ambitious in trying to tap into the changing world of logistics (last mile) market .Should work out for them but i dont think they should completely give up on their other traditional sheds as these should recover in what appears to be an improvement in the economy.I think the share price is about right at the moment as nav will improve significantly when next valuation is made
I've sold a fair few of these at prices between £3.34 and £3.37.
Why? In my opinion trading is weak; slightly less new rent coming in than old going out, compared to better figures the same time last year. This may be mitigated by sales and purchases improving book cost and rentals.
It seems likely that the company will meet expectations, but in my opinion the share price has got ahead of itself, not an uncommon picture in an overvalued market.
i've still got a decent holding, but may reduce the size further, if I can find anything to buy (a real struggle just now).
p.s. My mechanistic approach to buying REITs is that a good time to buy is
a) When the yield is close to 5.5%
b) When the share price is below NAV
c) If the company is in a part of the market that I like ie not retail or offices in the Thames Valley
d) When gearing is not far above 40%
That places 'excellent value' for SGRO at £2.70 or below, and 'good value' at £2.80, in my opinion. I will 'top up' heavily if the price gets to £2.70. These prices are possible if there is a 'taper tantrum' in the market.
I still think that there will be a hiccup or two in the market this autumn and possibly a real kick down next autumn. But I am a total amateur, and often wrong, so don't place any weight on my thoughts!
I sold out in May at 2.89 and watched this go down into the 2.60's and back up to 3.10's without doing anything despite having an alert at 2.75 which was my target buy back in price. I won't make the same mistake again, I'm a buyer if it gets to 2.75 even though I won't have a damn clue why it got there!
Keep up the informative posts Grey. I have been watching HSTN since July following reading one of your posts here. Just wish I had acted as they are up 10% since then.
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