MIDAS SHARE TIPS UPDATE: Our tip, warehouse specialist Urban Logistics, is riding the crest of a wave
The UK boasts more than 400 million square feet of warehouse space, equivalent to more than 6,000 football pitches.
A year ago, around 7.5 per cent of that space was vacant. Today, the figure has fallen to 4 per cent, a record low.
Companies are clamouring for warehouses. Online shopping accounts for more than a quarter of all retail sales and orders need to be shipped out fast. Supply shortages have also driven businesses to store more products in this country, rather than wait for goods to be shipped in from overseas.
Big business: The UK boasts more than 400 million square feet of warehouse space, equivalent to more than 6,000 football pitches
Warehouse specialist Urban Logistics is riding the crest of this wave. Midas recommended the stock in 2019, when the shares were £1.23. Today, they are 43 per cent higher at £1.76 and the company is about to become even larger, announcing a £200million fundraising last week, having raised £108million on the stock market just five months ago.
The new shares are priced at £1.70 and they are available via intermediaries such as Hargreaves Lansdown, AJ Bell and Interactive Investor, as well the Primary Bid app. The offer, open until early December, is worth a closer look. Urban Logistics joined the junior AIM market five years ago, since when chief executive Richard Moffitt has amassed a portfolio of around 100 warehouses, with an average size of 90,000 square feet.
Dotted across the country, these warehouses are let to businesses such as Amazon, Tesco-owned cashand-carry group Booker and Unipart, which stores and delivers supplies for the NHS.
Most tenants are involved in the provision of essential goods such as food and drugs, but the group even boasts Fiden Studios, which makes films for Netflix, as a tenant.
With demand at record levels, good warehouse sites are hard to find, but Moffitt has spent 30 years in the property industry, he has developed a wide network of contacts and has managed to amass a £400million pipeline of new assets – hence the current fundraising.
Once this transaction is completed, Moffitt hopes to expand the Urban portfolio to around 150 properties, while sticking to the core principles that have taken the business to where it is today – focusing on medium-sized warehouses near city centres, letting space to high-quality tenants and actively managing sites so that rents increase at a steady clip.
The strategy has worked well to date. Interim results to September, released earlier this month, showed a 70 per cent increase in rental income to £16million, while the portfolio was valued at £660million, a like-for-like increase of more than 11 per cent since last year.
The interim dividend was maintained at 3.25p and brokers expect the total dividend to stick at 7.6p for the year to March, even though Moffitt is issuing around more than 100 million new shares this month and added another 70 million in July. Further out, strong growth in the payout is forecast, with 9.8p pencilled in for 2023 and 10.3p for the following year.
The company is also moving from AIM to the main market in December, which should give a further boost to the shares.
Midas verdict: Urban Logistics has made great strides in recent years and investors have benefited from generous dividends and a rising share price. The trend should continue for some while, so existing investors might consider adding to their holdings in the current fundraising, while new investors could also buy a few shares at the £1.70 new issue price. Moffitt and his chairman, Nigel Rich, will be splashing out more than £250,000 of their own money as part of the fundraising – an encouraging sign of confidence in the business.
Traded on: AIM but moving to main market Ticker: SHED Contact: urbanlogisticsreit.com
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