Intu SGS - Sarria Daily Comments

SGS (INTU) held an investor call yesterday but no new details were shared beyond what was contained in the quarterly presentation released last month. The changes in business rates in the UK (where small operators are exempt from business rates) might increase legal costs as larger retailers try to manipulate their operations via new operating entities that would “qualify” for the exemption. This will reduce the credit quality of the counter-party to SGS but increases the affordability of rent to these newly incorporated entities. Apart from the morals of “gaming” the tax system, successful retailers would be in a better position to pay current and future rents.