SEGRO (AO) | Hold | Confirms new UK Big Box JV

Research evidence excerpt

SEGRO (AO) | Hold | Confirms new UK Big Box JV

SEGRO Hold | Target Price: 780p

Company description Management

SEGRO is a UK Real Estate Investment Trust (REIT), and a leading owner, asset David Sleath, CEO

manager, and developer of modern warehousing and industrial property across Susanne Schroeter-Crossan, CFO

Europe with a portfolio >GBP13.0bn. It is the third-largest REIT in Europe. Since Andy Gulliford, COO

2011, the company has undergone a reorientation of its strategy by selling non- Key shareholders

core assets and focusing on rent roll growth. Rental income has been boosted by Free float 73.95%

own development activities that really started to kick in in 2015. BlackRock 11.01%

Norges Bank 9.05%

APG 5.99%

Investment case Valuation methodology

SEGRO boasts a portfolio that comprises 98% logistics assets, We value SEGRO using a mix of a DCF (70%: 6.3 WACC, 74% OM,

with 67% exposure to the urban warehousing segment and c. 2.2% g) and a NAV-based model adjusted for dividends (30%).

33% in "big box" logistics assets. Due to supply constraints, the SEGRO still benefits from a lower WACC of our logistics names to

former has seen strong rental growth over the last few years. reflect the qualitative portfolio.

SEGRO aims to be a leading income-focused REIT with the goal Risks to our rating

of growing the rent roll (net annualised rental income), primarily Higher-for-longer interest rates in a slow-growth context.

through increasing rent from existing assets, followed by Slowdown in the occupier's market raising questions on rental

generating new rent through developments. outlook and incentives.

SEGRO has stepped up its development operations since 2015, Yields from the investment class remain steady due to: 1) higher