Berenberg predicts winners and losers from REITs results season
The equity research team at investment bank Berenberg has taken a look at the impending results season for UK REITs and predicted that management teams of the big listed names will be “keen to try and turn the attention towards the positives… in the hope that their share prices will react”.
In their results preview note, Miranda Cockburn and Yudith Karunaratna said next week’s full-year results from SEGRO (16 February) – which will kick off results season “in earnest” – are likely to be “upbeat” and showing “only a marginal setback in values in H2 2023”.
“With the wider industrial market having experienced a slowdown over the past year, it will be interesting to see whether SEGRO is maintaining occupancy and whether there are any differences in occupational performance between the various markets,” they added.
The equity research team at investment bank Berenberg has taken a look at the impending results season for UK REITs and predicted that management teams of the big listed names will be “keen to try and turn the attention towards the positives… in the hope that their share prices will react”.
In their results preview note, Miranda Cockburn and Yudith Karunaratna said next week’s full-year results from SEGRO (16 February) – which will kick off results season “in earnest” – are likely to be “upbeat” and showing “only a marginal setback in values in H2 2023”.
“With the wider industrial market having experienced a slowdown over the past year, it will be interesting to see whether SEGRO is maintaining occupancy and whether there are any differences in occupational performance between the various markets,” they added.
Next up is Unite (27 February), from which the Berenberg duo are expecting to hear about rental growth and overseas students numbers. “We will also be looking for details on progress with its development pipeline and ongoing cladding remediation works,” they said.
Derwent London’s full-year look (28 February) at London office occupation is set to be “upbeat”, the investment bank’s team said, in likely contrast with a “cautious view” of the investment market. “We will look for an update on leasing its current development projects and how confident it is to start any new schemes. Any indication of the difference in performance between its prime and secondary assets would be welcome, both in terms of rents and values.”
PHP’s valuations (28 February) are expected to remain “relatively steady”, the team said: “The focus for the company is on asset management projects, given that its development pipeline has been scaled back; in terms of acquisitions, management is waiting for interest rates to settle.”
Shaftesbury Capital’s full-year results (29 February) are likely to reflect the cost benefits of the merger that formed the company, Berenberg said. “We will look for an update on the disposal of its non-core Fitzrovia assets (piecemeal rather than as a portfolio) as well as current refurbishment projects and any prospective acquisitions”.
Tritax Big Box (1 March) posted a 1.7% fall in values in H2 2023 and Berenberg said it has updated its NTA forecast to reflect that figure. “The focus will therefore be on earnings and the outlook for growth from the reversion and development completions.”
CLS Holdings has seen its shares tank by 43% over the past 12 months as “investors have run scared of the office sector”. For its full-year results on 6 March, Berenberg said, “we are keen to see the relative valuation performance of the UK portfolio versus the French and German portfolios”. They added: “The focus will be in part on its occupational performance and letting progress with its newly completed developments, as well as disposal progress, which is needed to reduce leverage.”
When Capital & Regional posts full-year numbers on 7 March, the analysts said, the market will expect to hear an update on its acquisition of the Gyle in Edinburgh (pictured), as well as “progress being made its various active management initiatives and whether management is seeing any signs of selective rental growth”.
Supermarket Income REIT (13 March) could see a 4% fall in value in its half-year results, Berenberg said, driven by an outward yield shift to roughly 6%. “The company has been relatively quiet over the past six months and we expect questions about whether it is seeing opportunities in the market, and if it does, how it would finance these,” the team added.
Finally, Life Science REIT will post full-year results on 26 March. “Although Life Science REIT is well positioned in a growth sub-sector, its valuation may still be affected by the categorisation of some of its assets as “offices” and so we see risk to the downside although offsetting this should be the impact of recent leasing and further progression with its development of Oxford Tech Park,” Berenberg said.
“We will be keen to see how earnings have progressed over the year and look for guidance as to when management believes dividend cover should be achievable.”
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