Citi upgraded LondonMetric to ‘buy’ from ‘neutral’ on Friday, saying it remains confident of structural tailwinds for logistics, estimating a doubling of space requirements over around 10 years.
The bank said this will be significantly accelerated by Covid, where LondonMetric is “aptly positioned” with a portfolio of around 72% in distribution logistics.
“LMP’s exposure to retail has been resilient in the face of the pandemic,” Citi said.
“In our view, logistics development is unlikely to keep pace with demand thus demand appears to be spilling over into other assets including grocery and other roadside assets benefitting their long-income portfolio in potential for alternative uses.
“The demand-supply imbalance of warehousing space in the UK is expected to continue to drive rental growth and rents still have a low proportion of overall cost for online businesses.”
Ultra Electronics was updated by Citi as well, as the bank raised its target price to 3,500p per share, to reflect the bid from Cobham and Advent.
It maintained a ‘neutral’ stance on the stock.
Fund management services provider JTC, meanwhile, slumped on Friday after Shore Capital downgraded the stock to ‘sell’ from ‘hold’, saying it was time to take some profits after recent share price strength.
Shore noted that since the trading update on 22 July, the shares have risen 24%.
Since the update, JTC’s 12-month forward price-to-earnings has expanded from around 21x to 27x, with limited yield support.
“Evidently this hasn’t been driven by earnings expectations,” it said.
“We therefore think that, reading across from Sanne’s takeout, the market has placed a private equity bid premium on JTC’s shares.”
ShoreCap said the breadth of employee ownership is one of JTC’s hallmark successes and a feature which reduces the likelihood of a PE bid succeeding.
“As such, JTC’s valuation looks stretched to us,” it said.
