Supermarket Income REIT

LN: SUPR

Market Cap£1,598m

Last Close 129p

Supermarket Income REIT, listed on the special funds segment of the LSE, invests in supermarket property, let to leading UK supermarket operators, on long, RPI-linked leases. The investment objective is to provide an attractive level of income, with the potential for capital growth.

Investment summary

Supermarket Income REIT (SUPR) has raised £300m (gross) in a substantially oversubscribed equity issue that had initially targeted £175m. Investor demand was accompanied by an increase in the availability of attractive investment opportunities. Acquisition-led growth has increased diversification and generated economies of scale. Migration to the Premium Segment of the LSE, with likely inclusion in the FTSE 250 and EPRA NAREIT indices in June, should provide access to a wider pool of investors and the attainment of an Investment Grade credit rating should increase debt funding flexibility, as equity proceeds are deployed. With 85% of rents index-linked inflation is providing a positive tailwind for SUPR and given the non-discretionary nature of most grocery sales, operators have historically benefitted also. Structural shifts to home working and online shopping add additional support to SUPR’s omnichannel store focus.

Y/E Jun	Revenue (£m)	EBITDA (£m)	PBT (£m)	EPS (p)	P/E (x)	P/CF (x)
2020A	25.5	21.2	16.8	5.0	25.8	16.0
2021A	46.2	38.7	36.8	5.6	23.0	19.7
2022E	69.1	57.3	56.5	6.1	21.1	20.7
2023E	80.7	68.0	61.4	6.2	20.8	19.1

Industry outlook

Supermarket property has a long record of positive total returns underpinned by stable income returns in part due to long-leases, a strong occupier covenant, and the non-cyclical nature of grocery retailing. Supermarkets have been net beneficiary of the pandemic which has boosted sales, particularly online and fulfilled by omnichannel stores.

Last updated on 20/05/2022