Fund Profile

Disclaimer

This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.

Overview
BBOX invests in what might be the structural winners from the pandemic crisis…
Overview

Tritax Big Box REIT (BBOX) invests primarily in the large-scale sites at the centre of modern distribution and logistics networks – so-called ‘big boxes’ or ‘mega boxes’. These are crucial to online-only retailers and to the distribution networks of those multichannel retailers operating nationally or internationally. The largest single tenant is Amazon, responsible for 13% of the company’s rental income, and the second largest is Ocado. Manufacturers, wholesalers and courier services are major tenants.

‘Big boxes’ serve as centralised hubs for more complicated networks, offering efficiencies of scale and location, and frequently being newer, more automated and energy-efficient structures. The sector has performed strongly in recent years as online sales and click-and-collect services have stolen market share from bricks-and-mortar sales. As we discuss in the Portfolio section, the yield compression that has resulted means BBOX is now focussing on augmenting its core portfolio with land and early-stage developments, largely pre-let, which offer the prospect of greater returns and are smaller nodes in the same distribution networks.

BBOX has fallen onto a 20% discount following the emergence of the pandemic, close to the average of the generalist-dominated AIC Property – UK Commercial sector. The 7p dividend guidance for 2020 has been withdrawn, and the first quarterly payment was reduced slightly from what had been expected (to 1.5625p). This would amount to a yield of 5.2% annualized, although given the ongoing situation no commitment regarding the dividend has been made. However, the manager Tritax Group notes that around 50% of the portfolio is let to tenants with defensive characteristics in the current environment, such as online retailers, supermarkets and delivery services.

Analyst's View

In our view, the current crisis is accelerating the trend towards online retailing, and therefore any valuation falls seen by BBOX this year could create a greater long-term opportunity. High demand and low supply have compressed yields on big boxes in recent years. While there may be a hit to one or two quarters’ rental income, we think that the same trends could reassert themselves more strongly once the crisis has passed.

Thanks to the company only issuing semi-annual NAVs, it is hard to get a true handle on the discount, but we note in the Discount section that adjustments to generalists’ portfolios have been modest so far. We would expect the industrials sector – and logistics, in particular – to be less affected by the current crisis than bricks-and-mortar retail and offices because restrictions on shops and office working are likely to be eased slowly. BBOX’s strategy has been slightly diluted by the focus on land and pre-let developments, but as far as we can see the new, smaller sites are benefitting from the same themes.

We acknowledge the high level of gearing is a risk, but again distinguish the short- from the long-term issues. In the Gearing section we show that there is little need for refinancing for many years, and covenants allow for much higher falls in NAV than we think are likely.

Bull Bear
Invests in sector with strong structural headwinds and likely to be a relative winner from the pandemic Highly geared relative to commercial-property generalists
Discount is close to that of the generalist trusts which have more troubled outlooks Infrequent valuations make assessment of share-price value hard
Relative to other property trusts, dividend is potentially better supported thanks to better prospects for sector Due to high sector valuations, needs to conduct riskier developments to maintain high total returns
Continue to Portfolio

Welcome to Kepler Trust Intelligence

Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority.
Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority. To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.