ii view: Tritax Big Box REIT ups the dividend by 2.2%

Tritax Big Box REIT underlines the structural change in shopping habits.

First-half results to 30 June 2019 

• Adjusted operating profit up 5.7% to £60.7 million
• Headline Net Asset Value (NAV) down 1.8% to 150.08p per share
• Cost adjusted Net Asset Value (NAV) up 0.7% per share
• Interim dividend up 2.2% to 3.425p per share
• Expect a total full year dividend of 6.85 pence per share, up 2.2% on 2018

Chairman Sir Richard Jewson said:

"The long-term fundamentals of our market are positive. The sector continues to benefit from the structural change in shopping habits, as consumers switch from the high street to buying online, creating ongoing demand for logistics space to fulfil these orders.

 With Brexit contributing to an uncertain economic environment and making it more difficult for companies to grow their profits, the operational efficiencies and cost savings offered by Big Boxes remain compelling to occupiers. Businesses across industries have signalled their intentions to invest in logistics infrastructure, including new warehouse facilities as well as systems and automation, to facilitate efficient supply chains.”

ii round-up:

Tritax Big Box (LSE:BBOX) is a UK real estate investment trust focused on investing in larger scale logistics real estate. 

It invests in and actively manages existing income-producing assets, pre-let forward funded developments and land suitable for Big Box development. 

Group customers currently include Amazon.com Inc (NASDAQ:AMZN), Tesco (LSE:TSCO), Unilever (LSE:ULVR), Royal Mail (LSE:RMG) and Ocado Group (LSE:OCDO). 

The prior acquisition of privately owned db Symmetry, owner of a large land bank, muddy the group’s half-year results. Allowing for the cost of the acquisition and share issuance, net asset value fell, but gained when stripping this out. 

The independent value of the firm's portfolio rose by 12.6% to £3.85 billion, while the contracted rent roll increased by 3.5% to £166.8 million

ii view:

Structural change in shopping habits continues to underwrite growth. The environmental impact of real estate also creates demand for modern, energy efficient buildings. The near-term priority for management is to continue integrating the db Symmetry Portfolio. 

For investors, the dividend payment, underwritten by the group’s rental income, provides the major attraction. A prospective dividend yield approaching 5% (not guaranteed) remains attractive in today’s low-interest rate environment. 

Positives: 

• Exposure to structural change in shopping habits
• Interim dividend increased by 2.2%

Negatives:

• The db Symmetry acquisition may fail to enhance value
• Group gearing has moved closer to management’s medium-term target of 35%

The average rating of stock market analysts:

Buy