Supermarket Income REIT

LN: SUPR

Market Cap£1,254m

Last Close 101p

Supermarket Income REIT, listed on the premium 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

SUPR has acquired a further 4 supermarket stores for an aggregate £76.4m (before costs), taking total deployment since its £300m (gross) equity raise that closed in late April to £159m at a blended average net initial yield of 5.0%. The acquisition was partly funded through a first drawdown on recently agreed £412.1m unsecured credit facility, with a margin of 1.5% above SONIA, currently equivalent to an all-in finance cost of 3.4%. The facility leveraged its investment grade credit rating, providing increased and more flexible funding. With 85% of rents index-linked, inflation is providing a positive tailwind for SUPR while structural shifts to home working and online shopping add additional support to SUPR’s omnichannel store focus. The non-discretionary nature of grocery sales has historically supported the sector in an inflationary environment and although SUPR’s borrowing costs have increased we expect robust and visible income growth to support progressive dividend growth.

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	20.2	12.5
2021A	46.2	38.7	36.8	5.6	18.0	15.4
2022E	68.9	57.8	58.3	6.0	16.8	16.9
2023E	98.0	84.6	68.5	5.5	18.4	14.6

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.

Last updated on 28/09/2022