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SEGRO Plc - SGRO

Smart Finance

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Stock Research​

SEGRO Plc Ticker SGRO.L​

What does the company do?​


SEGRO Plc (formerly known as Slough Estates Group) is a British property investment and development company. They develop and invest in properties located across the UK and continental Europe.

Across Europe they have a total of 127 properties with the majority based in the UK.

UK 83, Netherlands 2, France 17, Poland 12, Germany 10, Czechia 1, Italy 1, Spain 1.

https://www.segro.com/property-search/property-map?sc_lang=en

SEGRO is a leading owner, manager and developer of modern warehouses and light industrial property. It owns or manages 8.1 millions sq meters of space valued around £13.3 billion.

Geographical-split.png


Market CapExchangeSectorSub- Sector
£14.55 BillionLSEReal EstateREIT - Industrial


The fundamentals.​

What do I look for?​


I like to look for a company with a healthy balance sheet, with good profit margins and normally with a healthy dividend payment which alongside has a low or sustainable payout ratio.


CompanyP/E Ratio
SGRO5.16
PHP14.31
BBOX4.98
Looking at the industrial average for the REIT sector in the uk its 23.75, but looking at the data this is skewered by one holding which is GCP with a P/E of 235. Taking out this one data point we have an average P/E ratio of 19.95.
Even with this average we can see that SGRO is well beneath this sector average and is looking cheap.

Though at first glance this seems cheap, we cannot value a REIT with a P/E ratio. What we have to look at is the Funds From Operation (FFO) and their Price to Net Asset Value (NAV) to get the real picture.
https://www.gurufocus.com/industry_overview.php?industry=REITs&region=UK

CompanyPrice-to-Funds From Operation P/FFO
SGRO30.10
PHP14.98
BBOX29.71
Taking a look at this we see that SEGRO is on the high side for the P/FFO valuation for UK Reits. Now taking a look towards P/NAV

CompanyShare PriceNAV
SGRO1,210.00p981*
PHP153.70p115.4
BBOX213.80p188.57
*2021 estimated average - https://www.segro.com/investors/analyst-consensus?sc_lang=en

Having a look over these companies of their share price compared to their Net Asset Values (NAV) these are all trading at a premium currently. With SGRO trading at a 23% premium.

Over the last 52 weeks SGRO has outperformed the S&P 500 by a small margin, but still is a beat! The S&P500 managed a gain of 24.18% with SGRO pulling 27.12% over the last year.

The dividend​

SEGRO Plc is a bi annual dividend stock which pays out in September and May. Over the last few years they have steadily been increasing their dividend with recently increasing their final from 14.4p to 15.2p per share.

They currently offer a dividend yield of 1.86% and a payout ratio of 72.14% using FFO compared to cash dividends paid.

Other fundamentals​


This stock currently has a Beta of 0.53 which indicates that its much less volatile than the overall market.

We can see here by this graph that SEGRO has a slow but consistently growing revenue from their properties over the last 4 years.
Screenshot 2021-10-12 184510.png

Analysts currently have Segro at a buy with 10 out of 19 rating it a buy/strong buy. 5 currently have it at a hold.
Screenshot 2021-10-12 184808.png

The industry weighting for SEGRO shows that they are the largest REIT in the UK by a nice margin. Currently they command 20.6% of the industry, with LAND holding 7.3% and third BLND with 6.5%. This shows SGRO has a good footing within the UK real estate sector.
Screenshot 2021-10-12 185016.png

Recent news​

SEGRO prices €500 million green bond.
SEGRO announces the launch and pricing of a ten year senior unsecured green bond. The bonds, which were eight times oversubscribed, were priced at 55 basis points above euro mid-swaps.
https://uk.finance.yahoo.com/news/segro-prices-500-million-inaugural-060000033.html

SEGRO and Schroders complete UK Industrial asset swap.
SEGRO and Schroders have completed a property swap transaction in which SEGRO has acquired from Schroders a 256,000 Sq Ft urban warehouse estate in West London for £140m. Schroders acquired from SEGRO a portfolio of UK big box and urban assets totalling 880,00 sq ft for £205m
https://uk.finance.yahoo.com/news/segro-schroders-complete-uk-industrial-060000815.html

UK-based SEGRO to sell six Italian warehouses to cash in on e-commerce boom.
SEGRO Plc said it was selling six warehouses in Italy for 127.5 million euros, capitalizing off a pandemic-led boom in e-commerce sales that saw huge volumes of shipments across the world.
https://uk.finance.yahoo.com/news/uks-segro-sell-six-italian-063140128.html
 

Smart Finance

Administrator
Staff member
Moderator
Feb 23, 2021
692
409
3,887
gumroad.com

Conclusion​


SEGRO Plc has a great portfolio of assets spread across Europe with properties in logistical places. SGRO management team has a very good and strong business plan and we have seen them put this to action with the sale of the 6 Italian warehouses recently.

Recently SGRO has seen a great surge in price, as we can tell by its out performance of the S&P over the last year and returning a fantastic 27.12%.

With that we can see why the P/FFO and P/NAV seem expensive. Though this is a solid company, it seems to me to be over priced at current valuations. This is also reflected in the small dividend yield.

It seems that they have an okay payout ratio for a stock with a little more wiggle room to increase dividends, especially with the amount of capital they are raising for new investments.

They have a great amount of industrial weighting in the UK sector but cannot get over the premium we would currently pay for the NAV of the company.

I would rate this company as a hold as a long term investor and seek a more attractive valuation.

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