Download PDF

1. Company Snapshot

1.a. Company Description

Grainger plc, together with its subsidiaries, designs, owns, operates, manages, and rents residential properties in the United Kingdom.It also provides property and asset management services.The company was incorporated in 1912 and is headquartered in Newcastle upon Tyne, the United Kingdom.

Show Full description

1.b. Last Insights on GRI

Grainger plc's recent performance has been impacted by mixed fundamentals, leading to a decline in investor sentiment. The company's earnings release on January 3, 2025, revealed a 1.3% decline in revenue, with adjusted operating profit decreasing by 2.5% year-over-year. This decline was partly due to higher operating costs and a decrease in rental income. Furthermore, the company's shares have been affected by a significant decline in property values, which has led to a 14.1% decrease in the company's net asset value per share.

1.c. Company Highlights

2. Grainger's Earnings Shine with Strong Growth in Income and Margin

Grainger, the UK's leading residential REIT, has delivered an impressive financial performance, with a 12% increase in net rental income, 12% earnings growth, and 10% dividend growth. The company's net asset value (NTA) stands at 298p per share. Earnings per share (EPS) came in at 0.00632, significantly below estimates of 0.049. Despite the EPS miss, the company's operational highlights are noteworthy, with 98.1% occupancy and 3.6% like-for-like rental growth. Grainger's gross-to-net margin is sector-leading at 25%. The company's clear capital allocation strategy focuses on maximizing returns for shareholders, having recycled £1.9 billion of assets since the start of its strategy.

Publication Date: Nov -30

📋 Highlights
  • Earnings & Dividend Growth:: Achieved 12% net rental income growth, 12% earnings growth, and 10% dividend increase, with NTA at 298p per share.
  • Operational Performance:: Maintained 98.1% occupancy, 3.6% like-for-like rental growth, and a sector-leading 25% gross-to-net margin.
  • Capital Allocation Strategy:: Recycled £1.9 billion in assets since strategy inception, targeting £60 million in earnings by 2026 (50% growth from 2024).
  • Dividend Policy & Returns:: Committed to distributing ≥80% of EPRA earnings, with mid-single-digit dividend growth and an 8% medium-term total return target.
  • Market Fundamentals:: Benefits from UK housing shortage, 28% affordability level, and regulatory clarity post-Renters' Rights Act, avoiding rent controls.

Operational Excellence and Growth Prospects

Grainger's growth story is compelling, with a target of £60 million in earnings by 2026 and £72 million by 2029, representing a 50% growth from 2024. The company expects rental growth to continue at 3% to 3.5% and has a resilient customer base. The conversion to REIT status has been completed, and Grainger expects to generate £15 million in savings in 2026 alone. The dividend policy will be to distribute at least 80% of EPRA earnings, with a mid-single-digit growth over the next four years. As Helen Gordon, CEO, noted, the UK government's initiatives to speed up housebuilding activity and focus on affordable housing are a positive step.

Valuation and Return Metrics

Grainger's valuation metrics indicate a relatively attractive position. The P/E Ratio stands at 12.58, and the P/B Ratio is 0.71, suggesting that the stock may be undervalued. The Dividend Yield is 3.54%, providing a relatively stable income stream. The ROE is 5.71%, and the ROIC is 2.75%, indicating a decent return on equity and invested capital. Analysts estimate next year's revenue growth at 8.8%, which, combined with the current valuation metrics, suggests a positive outlook for the stock.

Regulatory Environment and Business Model

The Renters' Rights Bill has achieved Royal Assent, ruling out rent control and introducing standards that align with Grainger's business model. The bill's changes include abolition of no-fault evictions, annual market rent reviews, pet-friendly policies, open-ended tenancies, and decent home standards. Grainger's operational platform delivers operational excellence, using AI-driven sentiment analysis to inform operations. The company's customer base is diverse, with a cap on student numbers, providing confidence in future rental growth and occupancy.

Growth Initiatives and Funding

Grainger's recent case study, Seraphina at Fortunes Dock in London, shows strong performance, with 88% occupancy and rental growth ahead of underwriting. The company's growth is funded, with a strong balance sheet and demonstrated track record of disposals. Grainger guides for a long-run rate of 3% to 3.5% rental growth for the year ahead, with healthy affordability levels at 28%. The company expects a normal seasonality, with growth higher in the second half, and a possible 100 basis points spread between the first and second half.

3. NewsRoom

Card image cap

Exploring 3 Promising Undervalued Small Caps With Insider Buying In Global

Dec -03

Source:

Card image cap

Grainger (LON:GRI) Has Announced That It Will Be Increasing Its Dividend To £0.0546

Nov -24

Source:

Card image cap

Grainger PLC (GRGTF) Full Year 2025 Earnings Call Highlights: Strong Growth Amidst Regulatory ...

Nov -20

Source:

Card image cap

Grainger plc's (LON:GRI) Stock Been Rising But Financials Look Weak: Should Shareholders Be Worried?

Jun -28

Source:

Card image cap

Grainger plc (LON:GRI) Stock Goes Ex-Dividend In Just Three Days

May -18

Source:

Card image cap

Grainger First Half 2025 Earnings: EPS: UK£0.075 (vs UK£0.03 loss in 1H 2024)

May -17

Source:

Card image cap

Grainger PLC (GRGTF) (H1 2025) Earnings Call Highlights: Strong Rental Income and Strategic ...

May -16

Source:

Card image cap

Does The Market Have A Low Tolerance For Grainger plc's (LON:GRI) Mixed Fundamentals?

Jan -03

Source:

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.91%)

6. Segments

Reversionary

Expected Growth: 3.5%

Grainger plc's 3.5% reversionary growth is driven by a combination of factors, including a strong UK housing market, increasing demand for private rented sector (PRS) properties, and the company's successful asset management strategy. Additionally, Grainger's diversified portfolio and active capital recycling program contribute to its growth momentum.

Private Rented Sector

Expected Growth: 4.5%

Grainger plc's 4.5% growth in the Private Rented Sector is driven by increasing demand for high-quality rental properties, particularly in London and the South East. Government policies, such as the abolition of Section 21, have increased the attractiveness of the sector. Additionally, Grainger's focus on providing affordable, mid-market rentals and its efficient operational model have contributed to its growth.

Other

Expected Growth: 3.0%

Grainger plc's 3.0% growth in 'Other' segment is driven by increasing demand for its property services, expansion of its UK portfolio, and strategic acquisitions. Additionally, the company's focus on digital transformation and cost savings initiatives have contributed to its growth. Furthermore, the 'Other' segment has benefited from the company's diversification into new markets, such as the provision of services to the UK's build-to-rent sector.

7. Detailed Products

MRO Supplies

Maintenance, Repair, and Operations (MRO) supplies including industrial equipment, tools, and maintenance products

Material Handling

Products for moving, storing, and handling materials, including conveyor systems, shelving, and packaging supplies

Lab and Safety

Laboratory equipment, safety gear, and personal protective equipment (PPE) for industrial and scientific applications

Facilities Management

Products for maintaining and managing facilities, including HVAC, plumbing, and electrical supplies

Metalworking

Metalworking tools and equipment, including cutting tools, abrasives, and machining supplies

Electrical and Electronics

Electrical and electronic components, including circuit breakers, fuses, and electrical connectors

Pumps and Valves

Pumps, valves, and fluid handling equipment for industrial and commercial applications

Janitorial and Sanitation

Cleaning supplies, janitorial equipment, and sanitation products for industrial and commercial facilities

8. Grainger plc's Porter Forces

Forces Ranking

Threat Of Substitutes

Grainger plc operates in the industrial distribution industry, where substitutes are limited. However, customers may opt for alternative products or services, posing a moderate threat.

Bargaining Power Of Customers

Grainger plc's customers are largely industrial and commercial businesses, which have limited bargaining power due to their dependence on the company's products and services.

Bargaining Power Of Suppliers

Grainger plc relies on a diverse supplier base, which reduces the bargaining power of individual suppliers. However, suppliers of critical components may still exert some influence.

Threat Of New Entrants

The industrial distribution industry has high barriers to entry, including significant capital requirements and complex logistics. This limits the threat of new entrants.

Intensity Of Rivalry

The industrial distribution industry is highly competitive, with several established players competing for market share. Grainger plc must continually innovate and improve its offerings to maintain its position.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 44.30%
Debt Cost 3.95%
Equity Weight 55.70%
Equity Cost 7.32%
WACC 5.82%
Leverage 79.52%

11. Quality Control: Grainger plc passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Allreal Holding

A-Score: 6.1/10

Value: 3.6

Growth: 2.1

Quality: 6.4

Yield: 6.9

Momentum: 7.5

Volatility: 10.0

1-Year Total Return ->

View Full Report
Stock-Card
VGP

A-Score: 5.8/10

Value: 3.1

Growth: 6.2

Quality: 7.0

Yield: 5.6

Momentum: 6.0

Volatility: 7.0

1-Year Total Return ->

View Full Report
Stock-Card
CPI Property Group

A-Score: 5.3/10

Value: 5.8

Growth: 6.0

Quality: 3.5

Yield: 0.0

Momentum: 6.5

Volatility: 10.0

1-Year Total Return ->

View Full Report
Stock-Card
Aroundtown

A-Score: 5.0/10

Value: 7.7

Growth: 4.1

Quality: 5.8

Yield: 3.1

Momentum: 6.0

Volatility: 3.3

1-Year Total Return ->

View Full Report
Stock-Card
Grainger

A-Score: 4.8/10

Value: 5.4

Growth: 3.4

Quality: 5.7

Yield: 5.0

Momentum: 1.0

Volatility: 8.0

1-Year Total Return ->

View Full Report
Stock-Card
Fabege

A-Score: 4.0/10

Value: 2.8

Growth: 3.7

Quality: 4.9

Yield: 4.4

Momentum: 2.5

Volatility: 6.0

1-Year Total Return ->

View Full Report

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

1.86$

Current Price

1.86$

Potential

-0.00%

Expected Cash-Flows