Berenberg upgrades Tritax Big Box on valuation

Berenberg upgraded Tritax Big Box on Thursday to ‘buy’ from ‘hold’ on valuation grounds.

The bank said Tritax’s FY 2022 results earlier this month highlighted the group’s operational resilience, albeit with material valuation weakness and lower organic growth versus peers.

"As we roll forward our model, we expect market conditions and Tritax’s operations to remain more resilient than the market currently implies," it said.

"We expect organic growth to lag peers, which is a function of Tritax’s larger exposure to (capped) index-linked leases and larger assets that generate lower organic rental growth levels. However, with a portfolio of mission-critical assets and higher covenant-quality tenant counterparties, income security is likely to remain robust."

Berenberg said that despite Tritax’s significant development pipeline, long-dated income and a 26 basis points fall in the UK 10-year gilt rate over the last month, shares have fallen by 11% over the same time.

"Market pricing implies distress…which we do not expect to materialise," it said.

Berenberg kept the price target at 170p.

At 0945 BST, the shares were up 3.8% at 138.50p.