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Supermarket Income REIT gets tailwind from buoyant grocery sector

Last updated: 15:49 14 Mar 2024 GMT, First published: 13:59 02 Mar 2021 GMT

Snapshot

  • Supermarket Income REIT in good shape after deleveraging, suggests broker
  • Supermarket Income REIT comfortable on busy grocery store sector
  • Supermarket REIT rated a 'buy' on robust balance sheet and dividend guidance
  • Atrato Capital highlights strong performance and growth opportunities for Supermarket Income REIT
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About the company

Supermarket Income REIT PLC is a real estate investment trust dedicated to investing in grocery properties which are an essential part of the UK's feed the nation infrastructure.

The company focuses on grocery stores which are omnichannel, fulfilling online and in-person sales.

Supermarket Income REIT provides investors with attractive, long-dated, secure, inflation-linked, growing income with the potential for capital appreciation over the longer term.

How it is doing

13 Mar 2024

Supermarket Income REIT’s balance sheet is in stronger shape following the sale in 2023 of the company’s interest in the 26-store Sainsbury’s Reversion Portfolio (SRP), notes Shore Capital

“SUPR used that sale to de-lever its balance sheet and conduct a debt refinancing exercise that involved the cancellation of two shorter-dated debt facilities, the reduction and extension of an existing debt facility, and the completion of a new unsecured debt facility with a new lender.”

Now, SUPR has an undemanding LTV of 33%, 3.1% average cost of debt and £100m of undrawn debt - leaving it well placed to evaluate strategic acquisitions given the current attractive margins between new debt at c.5.5% and selected acquisitions currently yielding c.6.5%.

Grocery markets continue to deliver robust growth with Tesco and Sainsbury gaining share and the investment case now looks more resilient with the benefit of balance sheet restructuring, a reduction in LTV and an expected stabilisation of asset values helping boost confidence.

13 Mar 2024

Supermarket Income REIT PLC (LSE:SUPR, OTC:SUPIF) delivered a robust set of interim results on Wednesday, supported by a growing rent roll and a resilient groceries sector.

The London-listed REIT increased annualised passing rents by 10% to £104.7 million, up from £95.5 million in the previous year’s interims, driven by acquisitions and contractual rental uplifts.

06 Feb 2024

Ratings agency Fitch has reaffirmed Supermarket Income REIT PLC (LSE:SUPR, OTC:SUPIF)’s BBB+ investment-grade rating, citing a stable outlook for the FTSE 250-listed group’s corporate bonds.

Fitch noted that income generated from Supermarket REIT’s portfolio of UK-based supermarkets “is supported by long, mostly inflation-indexed leases, at affordable levels for tenants”.

Insight: Supermarket Income REIT comfortable on busy grocery store sector

06 Apr 2020

Negotiating rents has been one of the key issues during the coronavirus crisis: most landlords have been accepting rent deferrals or offering discounts altogether to help their tenants.

But Supermarket Income REIT PLC (LON:SUPR) has stood out after receiving all of its rents for March even before the expected deadline.

What the brokers say

14 Mar 2024

Supermarket Income REIT PLC (LSE:SUPR, OTC:SUPIF) has been given a positive evaluation from Jefferies following the fund's half-year 2024 earnings report.

Jefferies maintained a ‘buy’ recommendation on the stock, with a price target of 90p.

Commenting on the 6.06p dividend per share (DPS) target laid out by Supermarket REIT, analysts said: “We forecast the dividend to be fully covered by the financial year 2024 due to continued rental uplifts for the group as mentioned by management with DPS increasing year on year by a moderate 1%. 

What management says

13 Mar 2024

Atrato Capital managing director, Robert Abraham and finance director Michael Perkins visit the Proactive studio to discuss the interim results of Supermarket Income REIT PLC (LSE:SUPR, OTC:SUPIF), emphasising the sector's strong performance.

Abraham said key tenants, Tesco and Sainsbury's, have reported robust sales growth and market share, particularly in omni-channel stores, which have seen the most significant sales increases. The investment market presents an attractive pipeline of accretive assets for SUPR, with current leverage allowing capacity for targeting these opportunities, he added.

Perkins noted that SUPR reported a 15% increase in net rental income for the six months ending December 2023, driven by acquisitions and rent review income, maintaining stable adjusted earnings of 2.9 pence. Despite operating at lower leverage, the company is on track to meet its full-year dividend target of 6.06 pence.

Atrato Capital highlights strong performance and growth opportunities for...

Atrato Capital managing director, Robert Abraham and finance director Michael Perkins visit the Proactive studio to discuss the interim results of Supermarket Income REIT PLC (LSE:SUPR, OTC:SUPIF), emphasising the sector's strong performance. Abraham said key tenants, Tesco and Sainsbury's,...

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