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Investing.com - Barclays downgraded Segro PLC (LON:SGRO), the $11.7 billion warehouse property company trading at a P/E of 13.9x, from Equalweight to Underweight on Monday, while reducing its price target to GBP5.50 from GBP7.00. According to InvestingPro analysis, the stock appears slightly undervalued based on its Fair Value model.
The downgrade follows Segro’s half-year results which revealed lower annual capital expenditure due to slower warehouse space take-up and delayed tenant decision-making, according to the investment bank. The company’s revenue declined by 4.8% in the last twelve months, while its current ratio of 0.31 suggests tight liquidity conditions.
Barclays highlighted that Segro delivers a lower cash flow yield (5.6% for FY25E rising to 6.3% by FY29E) compared to its Overweight-rated warehouse coverage, which averages 6.1% in FY25E, increasing to 7.7% by FY29E.
The bank expressed concern that the subdued take-up environment may continue longer than Segro’s management had anticipated, noting that a previously expected material turnaround mentioned during FY24 results "has thus far failed to materialise."
Barclays believes Segro’s strategy relies heavily on macro recovery, potentially putting "further pressure on the group’s rental growth prospects and development-led growth."
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