Self-storage operator Big Yellow appears to have shrugged off the sluggish housing market - a key driver in this sector - and declared a half-year dividend that matched its total payout for last year.
Management was certainly upbeat about the storage market. Occupancy across the mature portfolio of UK centres grew to 74 per cent from 68 per cent in December 2009. And, during the period, 209,000 square feet (sq ft) of occupancy growth was added with new move-ins per store up 20 per cent year on year. Average rental rates rose 3.2 per cent year on year, too, although discounts and incentives helped here.
Still, in the seven weeks following the period's end, occupancy worsened after 42,000 sq ft of space was returned. While that follows established seasonal patterns, it's still 40 per cent greater than last year. Nevertheless, rising property values helped drive a £4.3m valuation gain in the period. And eight out of its nine development sites have planning permission for new stores, although only one new opening is planned next year. Surplus land worth £21m will also be sold over the next three years.
|BIG YELLOW (BYG)|
|ORD PRICE:||320p||MARKET VALUE:||£419m|
|TOUCH:||319-320p||12M HIGH:||388p||LOW: 277p|
|DIVIDEND YIELD:||2.5%||TRADING STOCK:||NIL|
|DISCOUNT TO NAV:||25%|
|INVEST PROPERTIES:||£766m||NET DEBT:||49%|
|Half year to 30 Sep||Net asset value (p)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
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Big Yellow's past approach of a 40/60 half-year/full-year dividend split suggests a 10p full-year payout. But the 3.1 per cent prospective yield implied by that looks slender compared with rival Safestore's expected dividend. Moreover, based on Execution Noble's estimates, Big Yellow's shares, on 19.6 times 2011's expected earnings, look toppy compared with Safestore's 11.9 times rating. Fairly priced.
Last IC View: Good value, 317p, 17 May 2010.