MIDAS SHARE UPDATE: Bigger IS better... warehouse giant Tritax Big Box grows with online firms

By ROSIE MURRAY-WEST FOR THE MAIL ON SUNDAY

Updated:

Midas has long been a fan of Tritax Big Box, first recommending the shares when the company floated in 2013 at £1.00. 

It is the only Real Estate Investment Trust (or Reit) that concentrates on leasing massive ‘big box’ warehouses to the companies that provide us with our online shopping.

With Tritax, size is everything. The company’s giant distribution centres are often the size of ten or more football pitches. These behemoths are fast replacing the older, smaller warehouses that we see from the motorways when we travel.

The shares are now trading at £1.34, down from highs of almost £1.60 in July last year 

The shares are now trading at £1.34, down from highs of almost £1.60 in July last year 

Tritax says that its clients, which include Amazon, Argos and Eddie Stobart, gain economies of scale when they amalgamate distribution into a big box centre from these smaller sites. With online shopping continuing to grow, the group says, demand will grow too.

However, it is hard for new entrants to get into the big box market, and even existing operators must fight to get planning permission for warehouses the size of small villages.

Because of this, demand is strong, and the company can provide its investors with an attractive income stream. Tritax’s Christmas Eve gift this year was the announcement of a new forward-funded development near Durham that is already pre-let to a world-leading retailer, while the business also raised £400million in debt finance in early December.

Poor sentiment in the market, in retail in particular, has taken its toll on Tritax’s share price in recent months. 

The shares are now trading at £1.34, down from highs of almost £1.60 in July last year, and almost exactly at the same level as when Midas last tipped the shares in February 2016. 

The shares now trade on a small discount to net asset value, where previously they were at a premium, making Tritax a more compelling prospect for many. The prospective dividend yield is now an attractive five per cent.

MIDAS VERDICT: The trend towards online shopping isn’t going away any time soon, and even a dip in consumer demand won’t impact heavily on Tritax in the short term, as it benefits from long leases. Those who have already bought into Tritax should hold for now, while income-hungry investors who are in it for the long haul might even consider topping up their portfolio.

 

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