Citi ups target for Segro on improving macro outlook

Citi has raised its target price for Segro from 1,069p to 1,149p and reiterated a 'buy' rating, hailing the industrial real estate group's structural growth ahead of an upcoming expected fall in interest rates.

"We reiterate our 'buy' rating on Segro as real estate markets navigate the remainder of the cyclical trough and look forward to next-cycle upside, that for Segro we expect has begun," the US bank said in a research note.

"Segro's investment case is one of structural rental growth from the gradual march of online retail, increasing supply chain robustness, urban demand growth, and a demand inflection for data centres."

Citi reckons that Segro's portfolio will generate like-for-like rental growth per annum of 7% over the long term, "if not more", and that the portfolio value has 35% upside. Completions in developments and future acquisitions could also significantly upgrade earnings over the next few years.

"The stock could return to historic bull market multiples as cyclical confidence builds that could create further upside," Citi said.

The stock was down 0.9% at 899p by 1515 BST.