I own shares in Tritax Big Box REIT to ride the online shopping phenomenon. Demand for this firm’s logistics and warehousing services is heating up as parcels traffic in the UK clicks through the gears. It has a growing list of blue-chip clients that includes the likes of Amazon, Ocado, Royal Mail (LSE: RMG), Unilever and L’Oréal.
There are threats to this UK property share in 2021 and beyond though. The British economy is struggling from the twin issues of Covid-19 and Brexit. This could well dampen online shopping volumes and damage Tritax Big Box’s profits. Moreover, the possible introduction of an online sales tax could put the brakes on the stratospheric internet shopping growth of recent years.
Another UK e-commerce share
This is why I believe Tritax Eurobox (LSE: EBOX) might be a less risky buy today. The Covid-19 crisis has had significant economic consequences all over the continent. But the UK is the biggest economic casualty from the pandemic due to its services-heavy economy. On top of this, the prospect of a levy being slapped on online retailers is yet to be seriously raised in European Union countries.
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Okay, Britain has the largest online market in Europe. But Tritax Eurobox has a significant (and growing) exposure to Germany and Poland, two of the continent’s fastest-growing e-commerce markets. There’s already a significant shortage of ‘big box’ warehouse and distribution facilities in Central Europe. Like-for-like rents at Tritax Eurobox rose 2.9% in the last fiscal year as a result of this shortfall of new space.
There are risks that could threaten the company’s bright outlook, though. Securing planning permission to build big box facilities is often very difficult. The threat of rival facilities emerging around new developments is another. Also, this stock doesn’t come cheap. Tritax Eurobox trades on an elevated price-to-earnings (P/E) ratio of 30 times.
Still, I think its P/E represents the structural opportunities it currently enjoys. Besides, a corresponding 4.1% dividend yield helps to take the edge off. This beats the broader average of 3.5% for UK shares by a healthy margin.
An impressive package
As I say, there are reasons why online shopping growth in Britain might take a hit. But I’d still be happy to add Royal Mail to my ISA. This is even though recent share price strength leaves the courier trading on an elevated forward P/E ratio of around 23 times. Like Tritax Eurobox, this leaves it in danger of a share price correction should news flow begin to disappoint. The threat of strike action is ever-present at the business too.
But on the plus side, parcels traffic is rocketing at Royal Mail, as last week’s strong trade update showed. And the company is investing heavily in its package-moving operations to boost its expertise in this arena. It’s set to have four new parcel sorting machines in operation by spring next year to help it deal with bulging volumes. It’s also introducing new services like parcels pick-up from customers’ homes to help deliver long-term profits growth.
