Tag Archives: Stor-Age

Stor-Age Property REIT Limited – H1:25 Results – Building on a Solid Foundation

Share Code: SSS – Market Cap: R7.53bn – PE: 8.8x – DY: 7.29%

H1 FY 24 Results: In-line to better-than-expected

  • Distributable income grew by 3.5% from H1 FY24 (61.36cps) to H1 FY25 (63.51cps). This growth lagged the growth in FFO which rose nicely by 7.0%.
  • Rental income grew 8.1%, predominantly attributable to above inflation same-store rental growth in the SA segment. In the UK, same-store rental rate increases were in line with UK inflation but a good improvement in occupancies contributed to this segment’s growth.
  • Management have guided for FY25E distributable income of 122cps~126cps (the mid-range of this guidance implies a Forward Dividend Yield of c.7.9%).

Thoughts: UK difficulty offset by SA strength

  • Competitive pressures in the UK may result in limiting Storage King’s rental growth to inflation but a solid performance in the SA segment has continued with rental rates growing above inflation whilst still maintaining target occupancies levels (c.92.0%).
  • Shurgard’s acquisition of Lok’nStore is a good proxy for implying a valuation of the Group’s UK segment – we explore this further in the body of this note.

Updated Forecast and Valuation: Valuation & TP Lifted

  • We see Stor-Age’s fair value as R16.16 per share (previously R15.50) based on a blended valuation approach (DCF & relative P/B & EV/EBITDA values).
  • Rolling forward our fair value by 12 months at our Cost of Equity (less our expected dividend) gives us a 12m TP of R16.73 per share (previously R15.97), implying a total return of c.14.1% (price return of +7% and an expected dividend return of +7.14%).

Stor-Age Property REIT Limited – Initiation of Coverage – Good Stor(e) of Capital

Share Code: JSE: SSS – Market Cap: R7.2b – PE: 17.0x – DY: 7.9%

Business Overview:

  • Stor-Age is an integrated & internally managed REIT that owns & operates self-storage properties in South Africa and the United Kingdom with a portfolio comprising of 103 properties (60 in SA operate under Stor-Age brand & 43 in the UK operate under the Storage King brand).
  • Stor-Age is the largest, market-dominant self-storage brand in SA whilst ranking 6th in the UK (the UK is an under-penetrated Developed Market based on self-storage space per capita versus other DMs).

Key Upsides & Downsides:

  • The current interest rate-cutting cycle may lower finance costs, boost valuations & increase the attractiveness of the property sector.
  • Furthermore, Stor-Age has a highly defensive product (self-storage), and the share price has been resilient through economic downturns with an excellent track record of operating and dividend growth.
  • Self-storage has high barriers to entry that includes long lease-up periods for newly developed properties and limited available properties in high-density, visible urban nodes.
  • The Group has a fast-growing, high-margin income stream of management fees from third-party property management and digital marketing platform that offer its shareholders exciting optionality.
  • Management has a pipeline of 13 properties that are expected to add 60,000m2 of GLA to its portfolio in the near term.
  • Management has decided to decrease its distributable income payout ratio from 100% to a more sustainable 90~95%, thus resulting in some downward pressure on short-term distributions per share despite expected growth in forecast distributable income.

Forecast, Valuation and Implied Return:

  • We see Stor-age as having a fair value of c.R15.50 per share based on a blended average of a discounted cash flow valuation (R15.92) and relative valuation model (R15.08); the latter is based on the valuation multiples of comparable listed self-storage peer companies.
  • Rolling forward our fair value by 12 months at our Cost of Equity (less our expected dividend) gives us a 12m TP of R15.97 per share, implying a total return of c.14% based on the current share price (R15.02).
  • We see a c.14% total return in the stock as comprising a forecast price return of c.6% and forecast dividend yield of c.8%.