Shore Capital upgrades Supermarket Income REIT to 'hold'

Shore Capital has upgraded its recommendation for Supermarket Income from 'sell' to 'hold', saying that the real estate group's full-year results demonstrated "portfolio resilience" in the second half.

The company, which holds a portfolio of 51 grocery stores across the UK, reported a small decline in EPRA earnings per share to 5.8p, from 5.9p the year before, "in what has been a challenging year for the broader economy and the real estate investment market", according to chair Nick Hewson.

Net tangible assets (NTA) came in at 93p per share, ahead of Shore Capital's 89p forecast.

Meanwhile, analyst Andrew Saunders said that the rental outlook for supermarkets looks "mostly robust" given the majority of Supermarket Income's stores remain on reasonably long WAULTs (or weighted average unexpired lease terms) with rents subject to annual indexed reviews.

Saunders pointed out that, before Wednesday, the stock had fallen 12% since April.

"However, the shares current price/NTA rating of 0.81x for FY23F, although somewhat reduced, now looks consistent with a more stable H2 trading performance and we move our recommendation from 'sell' to 'hold'," Saunders said.

The stock was up 5% at 79p on Wednesday afternoon.