Banking

MIDAS SHARE TIPS: Amazon’s landlord can deliver a profit

When the UK first went into lockdown, commercial property companies were among the first to feel the effect. Investors worried that tenants would be unable to pay the rent, businesses would go bankrupt and valuations would sink. 

These things happened – but not as much as everyone feared. While some firms have suffered from low rental payments, high vacancies and tumbling valuations, others have flourished and their shares have soared. 

There are also a number of firms whose resilience is yet to be reflected in their share price, offering an attractive opportunity to snap up stocks on the cheap, with generous dividends thrown in.

Growing fast: Warehouse Reit lets sites to firms such as Amazon as well as local businesses

Warehouse Reit 

While most property companies have been shunned through the pandemic, Warehouse Reit has been one of the lucky ones and its shares have soared. Midas recommended the stock in 2018 when the price was 96.5p. The shares have risen 58 per cent to £1.52 and should continue to gain ground. 

Warehouse owns industrial sites close to city centres and let to companies ranging from Amazon to local businesses. 

The majority are involved in ecommerce and have flourished over the past year. Rent collection has been strong, the value of Warehouse’s portfolio has risen and the group has even raised money on the stock market to buy more assets.

Midas verdict: Warehouse Reit has grown materially through the pandemic and should continue in that vein. Industrial parks are in demand, rents are rising and supply is limited. At £1.52, the shares have further to run – and shareholders benefit from a 6.2p dividend too. 

Traded on: AIM Ticker: WHR Contact: warehousereit.co.uk or 020 3102 9465 

Ediston Property Investment Company 

Ediston Property Investment Company, known as EPIC, has had a very different time over the past year, but the shares now look like a bargain. Midas recommended the stock in June 2018, when the price was £1.11. By March of last year, it had plummeted to 45p and big investors were clamouring to know how EPIC boss Calum Bruce was going to persuade tenants to pay the rent. 

Two-thirds of the company’s properties are retail parks, while most of the rest are office blocks. Many market watchers considered that a pretty disastrous combination, but they have been proved wrong. The group collected 92 per cent of rent owed from last March to this, the figure rose to 95 per cent in the six months to this March and is likely to be even higher when Epic reports quarterly figures next month. 

Epic has benefited from several clever management choices. First, edge-of-town retail parks have fared far better through the pandemic than the high street. Second, Epic’s tenants include high-performing businesses such as B&M, B&Q and Pets at Home. And third, the company focuses on areas outside the SouthEast, including Scotland, Wales and the Midlands. 

The firm also set up a special team when the pandemic erupted, which talked directly to tenants and worked on plans to keep both sides happy. 

Today, discussions with tenants are less about paying their dues and more about taking on new space or extending leases. Later this week, the group opens a new retail park in Haddington, East Lothian, already pre-let to stores including Aldi, Iceland and Costa. Further expansion is in Bruce’s sights so new deals are likely in the coming months. 

Epic pays a monthly dividend, recently increased by 25 per cent to 0.417p, equating to 5p for the year. Further substantial increases are expected as the recovery continues. 

Midas verdict: Epic shares are 69p, up from their lows last year but still at a 19 per cent discount to the value of the firm’s assets. Existing shareholders have had a rough ride but they can take comfort in the group’s 7.3 per cent dividend yield. New investors could also grab a few shares, as the current price does not reflect Epic’s prospects.

Traded on: Main Market Ticker: EPIC Contact: epic-reit.com or 0131 240 8887 

Palace Capital 

Palace Capital has also been poorly treated since Covid-19 hit Britain. The shares almost halved to £1.71 when lockdowns were imposed last year and even though they have recovered to £2.60 since then, they are still well below pre-pandemic levels – and below the £3.12 price at which Midas recommended them in 2014. 

The decline seems unwarranted and should reverse over the coming months and beyond. 

Palace is run by two of the most experienced hands in the market, 83-year-old Stanley Davis and 78- year-old Neil Sinclair. The duo have long understood the value of talking to tenants and, like Epic, this has stood them in good stead over the past 15 months. 

Palace collected 95 per cent of rents owed in the year to March 2021 and raised its final dividend by 20 per cent to 3p, saying that shareholders would receive at least 12p in the current financial year. 

This reflects confidence in the future. Palace has built a portfolio of properties in cities such as York, Manchester, Leeds, Newcastle and Liverpool. Vacant space is being let, demand is brisk and sales are proceeding as planned. 

Midas verdict: Palace Capital’s portfolio is valued at £3.43 a share, so the stock is trading at a 24 per cent discount to the value of the group’s assets. Yet the business is making progress, pays attractive dividends and should be a prime beneficiary of the Government’s levelling up agenda. At £2.60, the shares are a buy. Existing investors should also keep the faith. 

Traded on: Main Market Ticker: PCA Contact: palacecapitalplc.com or 020 3301 8330  

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

Most Related Links :
todayuknews Governmental News Finance News

Source link

Back to top button