A new HYP candidate?

[Clitheroekid]

Well new to me, as I'd not come across it before. As I only dip in and out of this board I apologise if it's old hat to most of you.

The share in question is Tritax Big Box (BBOX) and it was brought to my attention by an article written by Edmund Jackson, one of the better contributors to Interactive Investor - https://www.ii.co.uk/analysis-commentar ... ExMTA4NAS2

It looks to be an attractive proposition at the current price. The demand for warehousing can only increase, and in the (admittedly unlikely) event of a no deal Brexit the demand is likely to increase dramatically to cope with the inevitable delays at ports.

With a reasonably well-covered yield of 5% and trading at a 9% discount to its NAV, combined with what looks like very limited downside I'm tempted, but I'd be interested to know what my more experienced fellow LF's think.

[bluedonkey]

FTSE 250, market cap £2bn.

[supremetwo]

Well new to me, as I'd not come across it before. As I only dip in and out of this board I apologise if it's old hat to most of you.

The share in question is Tritax Big Box (BBOX) and it was brought to my attention by an article written by Edmund Jackson, one of the better contributors to Interactive Investor - https://www.ii.co.uk/analysis-commentar ... ExMTA4NAS2

It looks to be an attractive proposition at the current price. The demand for warehousing can only increase, and in the (admittedly unlikely) event of a no deal Brexit the demand is likely to increase dramatically to cope with the inevitable delays at ports.

With a reasonably well-covered yield of 5% and trading at a 9% discount to its NAV, combined with what looks like very limited downside I'm tempted, but I'd be interested to know what my more experienced fellow LF's think.

Invested in the IPOs and rights since 2016, also the latest - triggered by the decline of the High Street chains and increasing online purchases.

[MDW1954]

Well new to me, as I'd not come across it before. As I only dip in and out of this board I apologise if it's old hat to most of you.

The share in question is Tritax Big Box (BBOX) and it was brought to my attention by an article written by Edmund Jackson, one of the better contributors to Interactive Investor - https://www.ii.co.uk/analysis-commentar ... ExMTA4NAS2

It looks to be an attractive proposition at the current price. The demand for warehousing can only increase, and in the (admittedly unlikely) event of a no deal Brexit the demand is likely to increase dramatically to cope with the inevitable delays at ports.

With a reasonably well-covered yield of 5% and trading at a 9% discount to its NAV, combined with what looks like very limited downside I'm tempted, but I'd be interested to know what my more experienced fellow LF's think.

CK,

It's one of my largest holdings, and I have named it as a "pick" in paid-for TMF publications (not the daily website write-ups).

For the avoidance of doubt, I increased my holding at the most recent open offer (last week), and put in additional cash to buy even more.

MDW1954

[Wasron]

I have held since 2016 and have added several times.

They provide exposure to retail without having to pick a winner from either the high street or the web.

I consider them a very attractive share for LTBH income seekers, with low volatility and a steady income stream.

Regards,

Wasron

[88V8]

So, divi covered three times, p/e c7.0, yield 4.6%?
All it needs is a few more years' track record.
Worth a watch, thankyou.

NRR New River also gives retail exposure, and yields 9.5% if one wishes to live dangerously.

V8

[Arborbridge]

A couple of observations from a quite look around:

the dividend us either covered of really well covered, depending on whether one uses basic or adjusted earnings.
This raises the first question and doubt: why is there more than a three to one difference between basic and adjusted earnings. I don't like seeing that as it raises suspicion of fancy footwork in accounting. There might be a straightforward reason, but it needs to be looked at.

Profit for the last four years are quite variable: why? and does HYP need a volatile profit line?

Cash flow has been reasonable compared with dividend pay out until last year when it only just covered the rising dividend (according to the stockwatch webpage) and in 2015 the cash flow dropped by half which would make this year's cover negative.

Finally: how does this company compared with Mucklow as an addition to our property sector?

Arb.

[MDW1954]

A couple of observations from a quite look around:

the dividend us either covered of really well covered, depending on whether one uses basic or adjusted earnings.
This raises the first question and doubt: why is there more than a three to one difference between basic and adjusted earnings. I don't like seeing that as it raises suspicion of fancy footwork in accounting. There might be a straightforward reason, but it needs to be looked at.

Profit for the last four years are quite variable: why? and does HYP need a volatile profit line?

Cash flow has been reasonable compared with dividend pay out until last year when it only just covered the rising dividend (according to the stockwatch webpage) and in 2015 the cash flow dropped by half which would make this year's cover negative.

Finally: how does this company compared with Mucklow as an addition to our property sector?

Arb.

Arb,

BBOX is in the business of leasing out giant warehouses and logistics facilities that are vastly larger than anything MKLW offers. Its biggest customer is Amazon, although Tesco, Morrison's and (I think) Sainsbury all feature. I would encourage readers to look at the company's portfolio, listed on its website, complete with photos. Frankly, it isn't anything like MKLW, and there aren't the usual mix of small office blocks and tiny industrial units, either.

Re: variable profits. I assume that you are referring to the dip in FY 2016. I focus on operating profits, which strip out the effect of property re-valuations on reported profit. On that basis, the 2016 dip goes away.

Don't forget, too, that growth is lumpy, with a lag occurring between cash-raisings and earnings arising from acquired properties.

MDW1954

[everhopeful]

Warehouse REIT (WHR) also operates in this field. I hold this and Big Box.

[Arborbridge]

MDW:

Well, you have my attention - that's all quite interesting as a new holding next to my BLND.

Why is there such a big difference between basic and adjusted eps? I expect there is a viable explanation, but it always seems to me such big variations hide various fiddle-factors of which one should beware.

Their portfolio does seems impressive, but where's the moat? Anyone could build big sheds given the capital. On the plus side, BBOX does seem to be in a growing area of the market, one might add, "unfortunately".

As regards Mucklow, I realise it's a different animal - I was just suggesting if one wants commerical property it might be an alternative, and I know some people here think it's a good company. I've looked a couple of times, but never invested.


Arb.

[Arborbridge]

Warehouse REIT (WHR) also operates in this field. I hold this and Big Box.

AAMOI neither WHR nor Big Box are included in the HYPTUSS spreadsheet data base, so I'm guessing they are not particularly in demand by HYPers.

Arb.

[MDW1954]

Warehouse REIT (WHR) also operates in this field. I hold this and Big Box.

Not exactly the same field. BBOX locates next to ports and motorway junctions, as its focus is distribution centre warehouses. WHR is more of a "final mile", urban warehouse specialist.

MDW1954

[MDW1954]

MDW:

Well, you have my attention - that's all quite interesting as a new holding next to my BLND.

Why is there such a big difference between basic and adjusted eps? I expect there is a viable explanation, but it always seems to me such big variations hide various fiddle-factors of which one should beware.

Their portfolio does seems impressive, but where's the moat? Anyone could build big sheds given the capital. On the plus side, BBOX does seem to be in a growing area of the market, one might add, "unfortunately".

As regards Mucklow, I realise it's a different animal - I was just suggesting if one wants commerical property it might be an alternative, and I know some people here think it's a good company. I've looked a couple of times, but never invested.


Arb.

I will look at the gap between basic and adjusted eps. I don't have an explanation right now, and it's about 18 months since I wrote that TMF report pick. (I have looked at it again, for an upcoming TMF report, but not in detail at the financials.)

The moat is land: land with planning permission, and land close to major motorway junctions. Last week's open offer was to buy another £200 million of the stuff, in the form of a development land bank.

By the way, the same manager, Tritax, also offer a more-recently launched Europe-focused variant of BBOX, in the form of EBOX. I hold that, as well. I won't say any more on the subject of EBOX, as that would be off-topic for this board.

MDW1954

[MDW1954]

MDW:

Well, you have my attention - that's all quite interesting as a new holding next to my BLND.

Why is there such a big difference between basic and adjusted eps? I expect there is a viable explanation, but it always seems to me such big variations hide various fiddle-factors of which one should beware.

Their portfolio does seems impressive, but where's the moat? Anyone could build big sheds given the capital. On the plus side, BBOX does seem to be in a growing area of the market, one might add, "unfortunately".

As regards Mucklow, I realise it's a different animal - I was just suggesting if one wants commerical property it might be an alternative, and I know some people here think it's a good company. I've looked a couple of times, but never invested.


Arb.

Arb,

In common with other REITs that I have seen, earnings are calculated on an EPRA basis.

EPRA Earnings is a measure of the underlying operating performance of an investment property company excluding fair value gains, investment property disposals and limited other items that are not considered to be part of the core activity of an investment property company.

The specific differences between BBOX's basic and adjusted earnings include adjustments for things such as changes in the fair value of investment properties, changes in the fair value of interest rate derivatives, license fees on forward-funded developments, loan amortisation, and interest capitalised on forward-funded developments.

MDW1954

[everhopeful]

Warehouse REIT (WHR) also operates in this field. I hold this and Big Box.

Not exactly the same field. BBOX locates next to ports and motorway junctions, as its focus is distribution centre warehouses. WHR is more of a "final mile", urban warehouse specialist.

MDW1954

You are correct in the difference between WHR and Bigbox but they both tap in to the perceived need for ever more warehouse space to satisfy the growth in e-commerce. The two REITs complement each other to some extent and I am happy to hold both.

Moderator Message:
Edited to fix quote.

[BristolDave]

A very interesting thread and an interesting potential alternative investment.

I have heard of Tritax BBOX but not Warehouse REIT so did a bit of investigation. The yield appears to be only 2.45% for WHR is this correct? If so not really a good income play.

Am I missing something?

[MDW1954]

A very interesting thread and an interesting potential alternative investment.

I have heard of Tritax BBOX but not Warehouse REIT so did a bit of investigation. The yield appears to be only 2.45% for WHR is this correct? If so not really a good income play.

Am I missing something?

No, you are not. That is the yield, and also the reason why I do not hold it.

I would add that it is a minnow, with a £170 million market capitalisation, and therefore just about as far outside the FTSE 350 as it is possible to be (and therefore not really a share for this board).

BBOX, by contrast, is in the FTSE 350, and has a market capitalisation of £2 billion.

MDW1954

[richfool]

A very interesting thread and an interesting potential alternative investment.

I have heard of Tritax BBOX but not Warehouse REIT so did a bit of investigation. The yield appears to be only 2.45% for WHR is this correct? If so not really a good income play.

Am I missing something?

No, you are not. That is the yield, and also the reason why I do not hold it.

I would add that it is a minnow, with a £170 million market capitalisation, and therefore just about as far outside the FTSE 350 as it is possible to be (and therefore not really a share for this board).

BBOX, by contrast, is in the FTSE 350, and has a market capitalisation of £2 billion.

MDW1954

According to Citywire WHR offers a yield of 5.88%. I think HL must calculate their dividend yields on a different basis, as they are often at variance with those shown on the Citywire website.

If it helps, the dividend was increased to 1.50p per share per quarter w.e.f. June 2018, which would equate to a yield of just under 6%.

I hold WHR, which is a REIT.

https://citywire.co.uk/funds_insider/in ... undID=4025

https://citywire.co.uk/funds_insider/in ... ePeriod=12
https://www.hl.co.uk/shares/shares-sear ... e-reit-ord

[MDW1954]

According to Citywire WHR offers a yield of 5.88%. I think HL must calculate their dividend yields on a different basis, as they are often at variance with those shown on the Citywire website.

If it helps, the dividend was increased to 1.50p per share per quarter w.e.f. June 2018, which would equate to a yield of just under 6%.

I hold WHR, which is a REIT.

https://citywire.co.uk/funds_insider/in ... undID=4025

https://citywire.co.uk/funds_insider/in ... ePeriod=12
https://www.hl.co.uk/shares/shares-sear ... e-reit-ord

Looks like you're right. I hadn't caught up with that. There was a 2.5p dividend in the first financial year after the IPO, which seems to be where HL's yield comes from. But the board is targeting 6p for the current year, and instead of final/ interim dividends, it seems to be paying out quarterly, which is where the higher yield figures come from.

It's still a very recently established REIT, of course, but that does rather change things. Thank you!

MDW1954

[Arborbridge]

But MDW's other objection, that it is too small remains, and also it does not have a long enough history... so I would conclude it is not admissable as a HYP suggestion.

Arb.