Premium content from Motley Fool Hidden Winners UK
Our monthly Best Buys Now are designed to highlight our team’s three favourite, most timely Buys from our growing list of small-cap recommendations, to help Fools build out their stock portfolios.
“Best Buys Now” Pick #1:
LondonMetric Property (LSE:LMP)
Why we like it: “LondonMetric (LSE: LMP) owns a property portfolio that’s skewed towards logistics (74.6% of the total) as well as grocery-led long-income (22.5%) assets. In our view, this is a quality mix that should perform well over the long term due to what we think are tailwinds for these sectors, and our assessment of its quality is perhaps backed up by the fact that the company has collected 99.5% of its rent in the year – despite a challenging real estate market.
“The company’s occupiers are also spread across different sectors, and it appears that the business has good relationships with its leading clients, who rate the company 9.1 out of 10 when asked if they’d recommend LondonMetric as a landlord. The high customer satisfaction rating of its occupiers is coupled with long leases and, encouragingly, many of these businesses proved resilient during lockdowns and consistently paid their rents.”
Why we like it now: LondonMetric’s latest fiscal year saw progress in rental income, net assets per share, and the dividend. While economic growth is threatened by high inflation, the company’s assets are potentially well placed to perform well in an inflationary environment, as they offer inflation protection through rental growth and inflation-linked leases, where higher inflation means higher rental uplifts (mainly relating to the company’s grocery assets). We believe worries about industrial property values are already priced into the share price – with the business currently changing hands at about a 30% discount to net assets. Coupled with a seemingly resilient balance sheet, we’re compelled to make LondonMetric a Best Buy Now for this month.
