Segro boosted by Barclays upgrade

Segro got a boost on Tuesday as Barclays lifted the stock to ‘overweight’ from ‘equalweight’ and upped the price target to 520p from 450p, saying the company was the largest and most liquid way to play the logistics investment theme.

Barclays noted that the structural challenges facing retail landlords have been well documented for many years now, adding that the advent of e-tailing has changed consumption habits and will continue to do so.

“Despite the challenges facing retail there are equal opportunities for logistics landlords. Adjusting supply chains to service not just stores but also customers directly will require considerable changes to the real estate infrastructure of the sector, moving it away from its historically low barrier/low growth reputation. Logistics portfolios that are well positioned to service the new demand should deliver strong growth for many years to come, in our opinion."

It said Segro’s “good quality, well located portfolio is well positioned to benefit”.

With around 40% of the portfolio located in greater London – including Heathrow and Park Royal campuses – Barclays reckons the group is well placed to serve the growing need for urban logistics.

In addition, it said that having recently replenished the land bank through several purchases, Segro is well positioned to deliver “excellent development returns” as it helps supply the required real estate solutions to these changing supply chains.

Barclays said that as illustrated by the recent equity raise, Segro has good access to capital and will be well placed to grow along with the sector.

“With private developers still struggling to get debt finance, we believe Segro is in a strong position.”

At 0942 BST, the shares were up 2.4% to 450.40p.