Sunday share tips: Sage, Tritax Big Box
By Iain Gilbert
Date: Sunday 01 Sep 2019
(Sharecast News) - In his Inside the City column for the Sunday Times, Ben Woods said British tech firm Sage was yet another "behemoth" trying to reinvent itself before being dragged "into the corporate graveyard", much like IBM before it.
Brown noted that Sage, founded in Newcastle back in 1981, had grown from "a poky operation" to one of the UK's biggest tech companies, but said the "rise of cloud computing" was threatening the group's very existence.
Sage, which has been trying to "wean itself off" outdated offline accountancy software in favour of subscriptions to products in the cloud, has seemingly tested investor's patience, said Brown, who pointed to the group's 14% share price drop since July.
However, Brown stated that Sage had made progress under chief executive Steve Hare, with the group's recent update showing a 28% increase in software subscriptions - accounting for £1.2bn-worth of the group's recurring sales.
"That is all well and good as long as headline growth is outstripping the competition. Sage, however, is starting to look like a straggler," said Brown.
Brown also felt there were questions as to whether or not the firm could sustain sales growth in the US and also highlighted that it had enjoyed an FX boost from the "Brexit-hit pound".
"With about a third of sales coming from America and 15% from France, Sage has been a net beneficiary of Britain's currency wobbles," said Brown.
"With competitors snapping at its heels and the transition to the cloud far from over, Sage looks like it is in for a bumpy ride. Avoid."
Over at The Telegraph, Robert Stephens took a fresh look at real estate investment trust Tritax Big Box on Sunday, noting that investing in online-focused retail stocks was not the only way to capitalise on the growth potential of e-commerce.
Stephens highlighted the fact that Tritax Big Box owned "very large logistics warehouses" in Britain and said demand for these assets was likely to rise as retailers reposition themselves to accommodate a continued shift towards online sales.
In the past ten years, Stephens pointed out that internet sales as a proportion of total retail sales had risen from 5.9% to 18.6% and even though the wider retail sector could face an uncertain period thanks to weak consumer confidence, Questor was "optimistic" about the prospects for e-commerce.
Looking forward, Stephens said the company's acquisition of an 87% interest in a geographically diverse land portfolio in February provided it with the opportunity to develop up to 38m square feet of logistics assets over a period of up to ten years, potentially more than doubling the size of its portfolio.
Although uncertainty may cloud the near-term performance of the economy as the Brexit process continues, Stephens also highlighted that Tritax's customer base was "highly diversified".
"While the wider commercial property market could be hurt by the challenging outlook for the economy, Tritax's rents are currently rising by more than inflation. Continued rental growth may be ahead and its focus on leases that contain upward-only rent reviews serves to reduce risk further," said Stephens.
"Its real appeal, though, lies in its capacity to benefit from the structural changes taking place in the retail sector. With a strong development pipeline and an imbalance between supply and demand in the "big box" sector, the company is well placed to capitalise on the growing popularity of e-commerce," said Stephens, who called the group a 'buy'.
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