Segro boosted by Liberum upgrade to 'buy'

Segro got a boost on Friday as Liberum upgraded the stock to ‘buy’ from ‘hold’ and hiked the price target to 640p from 505p as it upgraded its net asset value forecasts by around 7%.

The brokerage said it expects full-year results to confirm sustained strong occupier demand supporting like-for-like rental growth and development completions at an attractive 8% yield on cost.

“We also expect 2018 to see a continuation of rising online penetration of retail sales, increasingly in Europe allied with recovery in this region supporting Segro's outlook. With hindsight we pulled back to ‘hold’ too early and believe the cycle still has plenty of runway for income and capital value growth.”

Liberum added that the industrial sector continues to deliver strong capital growth, particularly around London. It pointed out that IPD data shows UK industrial capital growth of 11% in the year to October 2017, with much stronger growth of 13.6% in Greater London and 12.5% in the South East, which benefits Segro given its portfolio weighting.

The brokerage also said that Segro’s confirmation on Thursday that it has received planning permission for a mixed-use 230,000sqft light industrial and 1,300 unit residential scheme on a 30 acre site in Hayes, West London, next to a future Crossrail station could provide further capital uplift at the full year results.

At 1045 GMT, the shares were up 1.3% to 575.50p.