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1. Company Snapshot

1.a. Company Description

LondonMetric is a FTSE 250 REIT that owns one of the UK's leading listed logistics platforms alongside a diversified long income portfolio, with 16 million sq ft under management.It owns and manages desirable real estate that meets occupiers' demands, delivers reliable, repetitive and growing income-led returns and outperforms over the long term.

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1.b. Last Insights on LMP

LondonMetric Property's recent performance was negatively driven by mixed fundamentals, as indicated by a 13% decline in share price over the last three months. The company's institutional ownership, at 78%, implies significant influence from large investors. However, the lack of a recent earnings release and mixed fundamentals suggest that the market is being cautious. Furthermore, the absence of any notable news or announcements, such as share buybacks or new product launches, may have contributed to the negative sentiment.

1.c. Company Highlights

2. LondonMetric's Half-Year Results: Strong Performance and Growth Prospects

LondonMetric, a leading triple net income REIT in the UK, reported a robust half-year performance with a 15% increase in net rental income to £221.2 million, driven primarily by its logistics sector, which accounts for 54% of its portfolio. The company's EPRA earnings were £148.6 million, up 9.7% from last year, with earnings per share at 6.7p, up 28% over the last two years. The actual EPS came out at 0.067 relative to estimates at 0.068, a slight miss. The half-year dividend was increased by 7% to 6.1p, with a dividend cover of 111%.

Publication Date: Nov -23

📋 Highlights
  • Logistics Exposure Dominance: Logistics accounts for 54% of the portfolio, driving a 15% increase in net rental income to £221.2 million.
  • EPRA Earnings Growth: EPRA earnings rose to £148.6 million (+9.7% YoY), with earnings per share up 28% over two years to 6.7p.
  • Strong Dividend Growth: Half-year dividend increased by 7% to 6.1p, supported by 111% dividend cover, reflecting earnings resilience.
  • Portfolio Value & Growth: Portfolio valued at £7.4 billion, achieving 5.2% like-for-like annualized rental growth and £28 million reversionary potential.
  • Financial Prudence: Loan-to-value ratio at 35.1% with gross debt of £2.8 billion, maintaining an average cost of debt at 4.1%.

Portfolio Performance and Rental Growth

The portfolio value stands at £7.4 billion, with a 5.2% like-for-like annualized rental growth driven by an 18% average uplift on rent reviews and 24% on leasing and regears. The company expects to collect an additional £28 million of rent over the next 18 months. The total property return was 3.3%, with an EPRA NTA of 199.5p. The company's logistics sector has moved up to over 50% of its portfolio, and it sees opportunities in urban logistics, particularly in the UK.

Financial Position and Debt Profile

The loan-to-value (LTV) ratio is 35.1%, with a gross debt balance of £2.8 billion and an average cost of debt of 4.1%. The company has strengthened its financial position by completing new unsecured revolving credit facilities and a US private placement. The debt maturity profile shows a series of refinancings, but the company expects its financing costs to remain stable due to a reduction in commitment fees and fair value amortization.

Valuation and Growth Prospects

Analysts estimate next year's revenue growth at 20.0%. The current P/E Ratio is 10.93, and the Dividend Yield is 6.57%. The company's focus on winning sectors such as logistics, hospitality, and entertainment, convenience retail, and healthcare positions it for further income growth, earnings growth, and dividend progression. The company's small lot sizes are a significant strength, particularly in the current market, allowing for reinvestment in larger assets with better pricing.

Outlook and Opportunities

The company expects macro events to continue to dominate investor sentiment but is confident in its strategy. It sees opportunities in sale and leaseback, development funding, and pension fund portfolios. The company is open to exploring European investment opportunities but will be selective, considering factors such as lease structures and REIT regimes. The e-commerce growth is expected to drive demand for efficient logistics facilities, particularly in the food sector, where the company is investing in cold facilities.

3. NewsRoom

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Blue chips falter as FTSE outshone by European peers

Aug -28

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LondonMetric Property Plc (LON:LMP) Stock Is Going Strong But Fundamentals Look Uncertain: What Lies Ahead ?

Jul -01

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Form 8.3 - Aviva plc

Jun -23

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Form 8.3 - Direct Line Insurance Group plc

Jun -20

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Form 8.3 - Greencore, PLC

Jun -19

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Form 8.3 - Greencore, PLC

Jun -18

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Form 8.3 - Greencore, PLC

Jun -17

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Form 8.3 - Greencore, PLC

Jun -16

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.62%)

6. Segments

Distribution

Expected Growth: 4.6%

LondonMetric Property Plc's 4.6% growth is driven by strong demand for logistics and e-commerce spaces, strategic acquisitions, and proactive asset management. The company's focus on urban logistics and multi-let industrial estates has positioned it to capitalize on the shift towards online shopping, while its disciplined approach to capital allocation has enhanced shareholder value.

Long Income

Expected Growth: 4.65%

LondonMetric Property Plc's 4.65% growth is driven by increasing demand for logistics and e-commerce spaces, strategic acquisitions, and proactive asset management. The company's diversified portfolio, strong tenant relationships, and focus on high-growth regions also contribute to its growth momentum.

Retail Parks

Expected Growth: 4.65%

LondonMetric Property Plc's Retail Parks segment growth of 4.65% is driven by increasing consumer spending, e-commerce resistance, and strategic location of parks near transport hubs. Additionally, the company's focus on convenience, food, and services anchors, as well as its proactive asset management and redevelopment initiatives, contribute to the segment's growth.

Office

Expected Growth: 4.83%

LondonMetric Property Plc's 4.83% office segment growth is driven by increasing demand for high-quality, well-located offices in London, coupled with a strong supply chain and effective asset management. Additionally, the company's focus on refurbishment and redevelopment of existing assets, as well as strategic acquisitions, has contributed to the growth.

Residential

Expected Growth: 4.83%

LondonMetric Property Plc's 4.83% growth in Residential segment is driven by increasing demand for housing in London, limited supply, and rising rents. Additionally, the company's strategic focus on acquiring and developing high-quality residential assets, particularly in London's commuter belt, has contributed to the growth. Furthermore, the UK government's initiatives to boost housing supply and support first-time buyers have also supported the segment's growth.

7. Detailed Products

Industrial Estates

LondonMetric Property Plc offers industrial estates that provide flexible and adaptable spaces for businesses, including warehouses, distribution centers, and light industrial units.

Retail Parks

LondonMetric Property Plc develops and manages retail parks that offer a range of retail units, restaurants, and leisure facilities, providing a convenient and accessible shopping experience.

Distribution Centers

LondonMetric Property Plc provides modern and efficient distribution centers that cater to the needs of logistics and e-commerce companies, offering flexible and adaptable spaces.

Urban Logistics

LondonMetric Property Plc offers urban logistics facilities that provide last-mile delivery solutions, catering to the growing demand for fast and flexible logistics services.

Land and Development Opportunities

LondonMetric Property Plc offers land and development opportunities for businesses and developers, providing a range of sites and opportunities for development.

8. LondonMetric Property Plc's Porter Forces

Forces Ranking

Threat Of Substitutes

LondonMetric Property Plc operates in a niche market, and substitutes are limited, but not impossible. The company's focus on industrial and logistics properties reduces the threat of substitutes.

Bargaining Power Of Customers

LondonMetric Property Plc's customers are largely institutional investors and large corporates, which reduces their bargaining power. The company's diversified portfolio also limits customer concentration risk.

Bargaining Power Of Suppliers

LondonMetric Property Plc's suppliers are primarily construction companies and property developers. While they have some bargaining power, the company's scale and diversified portfolio mitigate this risk.

Threat Of New Entrants

The UK industrial and logistics property market has high barriers to entry, including significant capital requirements and regulatory hurdles. This limits the threat of new entrants.

Intensity Of Rivalry

The UK industrial and logistics property market is highly competitive, with several established players competing for a limited supply of properties. LondonMetric Property Plc must maintain its competitive edge through active asset management and strategic acquisitions.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 33.93%
Debt Cost 3.95%
Equity Weight 66.07%
Equity Cost 8.25%
WACC 6.79%
Leverage 51.34%

11. Quality Control: LondonMetric Property Plc passed 6 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

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MERLIN Properties

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Value: 5.8

Growth: 4.0

Quality: 6.9

Yield: 6.9

Momentum: 6.5

Volatility: 8.7

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LondonMetric Property

A-Score: 6.4/10

Value: 4.5

Growth: 5.7

Quality: 7.3

Yield: 8.8

Momentum: 3.0

Volatility: 9.3

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A-Score: 6.4/10

Value: 4.8

Growth: 2.3

Quality: 5.9

Yield: 10.0

Momentum: 7.0

Volatility: 8.3

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Covivio

A-Score: 5.7/10

Value: 4.0

Growth: 4.2

Quality: 3.9

Yield: 9.4

Momentum: 5.0

Volatility: 8.0

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LandSec

A-Score: 5.7/10

Value: 4.5

Growth: 3.2

Quality: 6.2

Yield: 8.1

Momentum: 4.0

Volatility: 8.3

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Unite

A-Score: 5.6/10

Value: 4.5

Growth: 6.3

Quality: 6.2

Yield: 6.9

Momentum: 2.0

Volatility: 7.7

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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