ii view: Tritax Big Box reports strong rental collection

Its tenants include Amazon and Ocado and the dividend yield is over 3%. We assess prospects.  

Trading update for the year-to-date

Chief executive Colin Godfrey said:

"We have made a good start to the year across all aspects of our business through a combination of effectively implementing our strategy and strong market fundamentals. The quality of our portfolio continues to be reflected in very high levels of rent collection while our asset management activities are enhancing value.”

ii round-up:

Large warehouse owner Tritax Big Box (LSE:BBOX) has flagged a good start to the year in a trading update to accompany its Annual General Meeting (AGM).

Very high levels of rent collection continue to be made, with just over a third of its warehouse tenants due to undergo a rent review this year and rental growth anticipated.

Tritax shares moved between marginal gains and losses in UK trading, having gained by more than 90% since pandemic induced lows in late March 2020. Shares for fellow warehouse and industrial property owner Segro (LSE:SGRO) are up close to 50% over the same time, while office and shop owner Land Securities (LSE:LAND) has risen by just over 25%. Many of its shop outlets were forced to close during pandemic lockdowns.

A total of 98% of first quarter 2021 and 95% of second-quarter rents had been received at Tritax, with management expecting a 99% collection rate by the end of June. 

Demand for logistics space in the UK has remained high following a record year of take-up in 2020. Tritax continues to actively manage its portfolio with the acquisition of a 872,000 square feet distribution facility in Avonmouth recently made for £90 million. 

More of its development sites are progressing through the planning process, offering it opportunity to capture greater letting opportunities from the second half of this year.

First-half results are scheduled for 5 August. 

ii view:

Tritax is the UK’s largest listed investor in logistics warehouses, and it owns the UK’s largest logistics-focused land platform. It has a diversified base of over 40 tenants which include Amazon (NASDAQ:AMZN), Morrison's (LSE:MRW), Tesco (LSE:TSCO), Ocado (LSE:OCDO), Howden (LSE:HWDN) and Marks & Spencer (LSE:MKS). Its annual rent roll increased by 8.4% during 2020 to just over £180 million.

For investors, a share price of around 189p compared to an end of year net asset value (NAV) per share of 169.92p, leaves the shares trading at a premium to NAV and therefore not obviously cheap. A 6.5% reduction in the 2020 dividend payment was triggered by early pandemic caution. But the NAV increased by 13% compared to 2019 and a full-year 2020 payment of 6.4p per share still leaves the shares trading on a historic 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:

• 2020 dividend payment reduced
• Year-end 2019 net asset value per share fell by 1.2%

The average rating of stock market analysts:

Buy