MIDAS SHARE TIPS UPDATE: Our 'big box' tip Tritax gets even bigger - with shares up 30 per cent

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Competition is a fact of life in the retail market but, as Sainsbury’s, Argos and others will testify, conditions have rarely been as ferocious as they are now.

Increasingly, the most successful operators are those with the best logistics. In other words, they have devised really efficient ways of storing and distributing goods.

Traditionally, big store groups would operate out of dozens of warehouses dotted round the country. Now, retailers prefer to use a handful of huge, strategically placed distribution centres instead, often the size of 10 football pitches and three or four storeys high.

Good fit: Marks & Spencer is renting its giant warehouse on a 25-year lease

Tritax Big Box REIT owns these sites and rents them out to companies such as Sainsbury’s, Marks & Spencer, B&Q, and even car maker Rolls-Royce.

Midas recommended the shares when they floated at 100p in December 2013. Today, they are 131½p and investors have enjoyed some generous dividends too. The performance has been impressive, but the company continues to grow and late last month launched a £100 million fundraising, offering shares at 124p. The fundraising closes on Thursday and is worth a closer look.

The ‘big box’ market is highly specialised and Tritax is the only listed operator in the country, with 25 mega-properties in its portfolio. There are several more in the pipeline too, hence the decision to ask the stock market for more cash.

Most people associate mega-warehouses with online retailing, but these giant units save time and money for high street stores, too. Demand has soared in recent years, competition for new sites has intensified and prices have increased substantially. However, Tritax’s bosses have worked in the sector for years. They are well connected and tend to buy sites before they come to market, so they can get them at lower rates.

The group mainly buys functioning warehouses, but sometimes it helps to finance new sites during development, as long as a tenant has been signed. Developers appreciate the funding help and offer Tritax more attractive rates in return.

Overall, the company is able to obtain sites more cheaply than other, smaller rivals while still securing attractive rents from tenants. Leases are long term and rental agreements are upward only, providing a steady and predictable cashflow.

Midas verdict: Demand for big boxes is growing and Tritax is a leading player. However, it still has just 10 per cent of the market so there is plenty of room for growth. Meanwhile, Tritax is scheduled to pay a 6.2p dividend this year, with increases expected in 2017 and beyond. Existing shareholders should hold. New investors may find the fundraising offers a good opportunity to buy.

Traded on: Main market Ticker: BBOX Contact: tritaxbigboxreitplc.co.uk or 020 7290 1616