I’ve been eager on Segro (LSE: SGRO) earlier than, however it’s a type of FTSE 100 shares that’s largely flown below my radar this previous yr.

Seeing how the Segro share price has fallen 25% because the 52-week excessive it set in July 2024, I’ve been wanting intently once more. And I like what I see.

What it does

It’s a reputation which may not journey off the tongue, so what’s Segro? It’s an actual property funding belief (REIT), and describes itself as “a number one proprietor, asset supervisor and developer of recent warehousing and industrial property“.

I believe that solutions one other query too. Why has the share price had such a tricky time? Inflation and rates of interest, retail sump, shaky financial outlook, actual property weak spot… nearly each firm in associated companies has felt the stress.

It’s large throughout Europe, which helps offset UK market threat. However the eurozone hasn’t precisely been sensible for enterprise prior to now few years both.

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Turnaround

Segro slipped to a few years of earnings per share (EPS) losses, a minimum of on a reported foundation. Nevertheless it swung again to each constructive reported and adjusted earnings in 2024. CEO David Sleath spoke of “£91 million of new headline rent, our third best year on record, including a 43% uplift from UK rent reviews and renewals.”

The worth of property below administration slipped within the yr. However the firm nonetheless reported an adjusted internet asset worth (NAV) per share of 907p. It’s exhausting to be exact on that, however it’s properly in extra of the share price. On the time of writing, we’re a reduction to NAV of 20%.

We’ve got a trailing price-to-earnings (P/E) ratio of 20, based mostly on adjusted 2024 figures. And which may look a bit excessive. However forecasts recommend it might drop beneath 9 within the subsequent couple of years. The earnings predictions maybe look a bit ambititous, however Segro says it’s anticipating good issues.

The CEO stated that constructive tendencies recommend leasing and pre-letting exercise will improve. And that “would help engaging, compounding earnings and dividend development within the medium-term“.

What subsequent?

Building within the business sector continues to be weak. And there needs to be a great likelihood it might keep like that for some time but. We see supply-side scarcity coupled with intense competitors from many others in the identical area. And that would make development fairly a problem within the subsequent few years.

At FY outcomes time, the corporate instructed us that “two-thirds of [its portfolio] is positioned in Europe’s largest cities, with the remaining one-third strategically positioned close to logistics hubs and alongside key transportation corridors“. That appears like a aggressive benefit, although some others can little doubt say one thing comparable.

Will I purchase Segro? I’d like to purchase a REIT, however I’m undecided. That’s primarily as a result of others are additionally engaging. And it’s partly as a result of I can see additional weak spot within the sector. However in the meanwhile, it’s ticking a lot of the proper bins.