Supermarket Income REIT invests in high-quality supermarket property in the UK. The shares are listed on the London Stock Exchange (SUPR) and provide investors with attractive inflation-linked income and long-term capital growth. The group’s investment objective is to offer its shareholders with an income together with capital growth by investing in a diversified portfolio of supermarket real estate assets in the United Kingdom.

Financial Highlights (H1 FY2019, £’ 000)

(Source: Interim Report, Company Website)

Supermarket Income REIT results for the six months to the end of December (H1-FY19) delivered healthy earnings growth as EPRA EPS came in at 2.5p (up from 1.2p in H1 FY18).This was driven by ERPA measured earnings rising to £4.7 million from £1.3 million at H1-18. Net Rental Income was the key outperformer with half-year rental income reported at £8.3m, up by 163% as compared with £3.1 million reported during H1 FY18, due to the income generated by the acquisitions that have made earlier. The company declared the dividend of 2.8p and highlighted that FY19 is on track for delivering dividend of 5.63p. SUPR’s EPRA NAV was unchanged in H1-19 as compared to previous six months and net initial yield remained steady at 4.9%. The company agreed for fresh £52 million debt facility with Bayerische Landesbank, with a fixed all-in interest cost of 2.6 per cent for the five-year term of the facility. Net loan to value ratio stood at 43.0 per cent as of December 31, 2018, with a current cost of debt of 2.5 per cent. Net Asset Value per ordinary share stood at 96 pence as at December 31, 2018. In H1 FY19, the company reported Operating Profit of £7.6 million as compared with a loss of £2.7 million during H1 FY18. Net Profit for the period stood at £5.5 million against a loss of £3.6 million reported last year.

Share Price Performance

Daily Chart as at Mar-27-19, before the market close (Source: Thomson Reuters)

At the time of writing, (as on March 27, 2019, at 10:41 AM GMT) shares of Supermarket Income REIT were quoting at GBX 101.90, declined by 0.1% against its previous day closing. During the last one-year shares have reached a 52w high of GBX 106.00 and a 52w low of GBX 94.86. The outstanding market capitalisation of the company stood at £187.90 million. At the current price (quoted in the price chart) stock was trading 3.87% below its 52w high and 7.42% above its 52w low. One-year price return of the stock stood at 0.49%.

Recent News
On 19^th July 2018, Supermarket Income Reit PLC acquired Morrisons’ Supermarket, a supermarket operator, from OPUS North LTD, for a total consideration of GBP 5.17 million. On 31^st May 2018, Supermarket Income Reit PLC acquired Tesco Extra Supermarket, a Scunthorpe-based discount department store operator, from Legal & General Pensions Ltd, owned by Legal & General Assurance Society Ltd, for a total consideration of GBP 53 million.

Risk Assessments and Growth Prospects
The Company continues to offer robust and growing returns through its investment in long-let food stores which have proved to be operationally and financially resilient despite the uncertainty caused by the ongoing Brexit process and the structural headwinds faced by non-food and high street retailers. Using the specialist knowledge of the sector, the company’s portfolio continues to provide attractive inflation-linked income for shareholders.

Conclusion
The supermarket specialist matures into one of the UK’s most competitive secure income vehicles. The company has reported net margins below the industry median. The group’s debt-equity ratio was higher as  compared to the industry median. The upgraded dividend expectations from a high-quality and low-risk rent roll will continue to help SUPR to gain attention amongst income-focused investors. With the UK property market facing increased uncertainty, long-income and inflation-linked portfolios provide room for re-pricing gains as investors chase security. Uncertainty around Brexit and the wider macro-economic environment has put pressure on the stock lately, but the company is financially well-positioned. Keeping in view all the fundamental and economic headwinds, we recommend the investors to keep a close watch on the stock at the current levels.

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