Join our community of smart investors

Lok'nStore's dividend boost

RESULTS: Aim-traded self-storage player Lok'nStore is in a strong competitive position following a shake-up of VAT rules in this year's Budget
October 29, 2012

Lok'nStore (LOK) is beginning to look like an income stock. Having tripled the dividend to 3p a share last year, the Aim-traded self-storage provider has now raised it to 5p. That's substantially ahead of earnings per share, but still well below funds from operations of 13p a share - a cash-flow measure that strips out the hefty depreciation bill.

IC TIP: Buy at 121p

Operating profit grew 36 per cent in the period to £2.14m, thanks largely to last June's bolt-on acquisition in document storage. The core self-storage business itself posted a 3 per cent increase in cash profits. The occupancy rate rose 2.9 percentage points to 58.3 per cent while running costs fell, although these gains were slightly offset by lower rental rates. Chief executive Andrew Jacobs says the industry - which is led by Safestore (SAFE) and Big Yellow (BYG) - is still in price-cutting mode.

That may have started to change in October, when VAT on self-storage became compulsory. Oddly, Lok'nStore has always charged VAT, while its peers haven't. Mr Jacobs attributes strong trading to the fact that competitors are now scrambling to pass on what amounts to a 20 per cent increase in costs. Panmure Gordon expects 2013 EPS of 5.06p (2012: 4.5p).

LOK'NSTORE GROUP (LOK)

ORD PRICE:121pMARKET VALUE:£30.3m
TOUCH:118-123p12-MONTH HIGH:122pLOW: 97p
DIVIDEND YIELD:4.1%TRADING PROPERTIES:nil
DISCOUNT TO NAV:22%
INVESTMENT PROPERTIES:£69.5mNET DEBT:66%

Year to 31 JulNet asset value (p)Pre-tax profit (£'000)Earnings per share (p)Dividend per share (p)
2008172-741-3.271.00
2009148-656-2.391.00
20101564310.881.00
20111549383.573.00
20121559263.015.00
% change+1-1-16+67

Ex-div: 14 Nov

Payment: 17 Dec