- Expansion looks more likely
- Looks priced for perfection
The trend towards ever smaller modern houses, as developers squeeze every last inch out of available development land, means parking excess stuff in safe storage is now a permanent feature of modern life. That is good news for Safestore (SAFE) where new sites can achieve initial income yields of over 6 per cent. The company’s focus on London and the southeast – it has 48 sites within the M25 – is also another plus point as, though the sites are smaller on average, they yield proportionately higher returns from space-starved commuters. In the meantime, reported profits rose to the rising valuations on its portfolio of investment properties.
Overall, that has given the company the confidence to expand further with management committing far more capital than this time last year; total committed capital was £98.6m, up from £15.3m. The increased investment meant the company drew down more cash from its lending facilities – over £43m, or a £10m increase on 2020. Safestore’s concentration on high density urban markets meant that its 77 London and Paris locations contributed £103.5m of revenue, which represents 45 per cent of the company's total revenue. It is also trying break into the Madrid market as well as consolidating its position in the Netherlands after an acquisition spree in 2019.
Peel Hunt noted that Safestore’s like-for-like revenue growth appears to be continuing into this year, up by over 17 per cent. The broker left its forecast for 2022 and 2023 EPS unchanged at 46.9p and 50.7p, respectively. That gives a fairly rich forward price to earnings ratio of 28, falling to 26. That is easily the highest valuation in Safestore’s peer group, which given the tremendous run the share has had over the past 12 months, justifies taking profits at levels that are now priced for perfection. Hold.
Last IC view: Buy, 945p, 10 Jun 2021
SAFESTORE (SAFE) | ||||
ORD PRICE: | 1,320p | MARKET VALUE: | £ 2.8bn | |
TOUCH: | 1,319-1,321p | 12M HIGH / LOW | 1,460p | 728p |
DIVIDEND YIELD: | 1.9% | TRADING PROP. | nil | |
PREMIUM TO NAV: | 208% | NET DEBT: | 38% | |
INVESTMENT PROP: | £1.95bn |
|
Year to 31 Oct | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2017 | 304 | 79.0 | 37.4 | 14.0 |
2018 | 376 | 185 | 84.4 | 16.25 |
2019 | 421 | 147 | 62.8 | 17.5 |
2020 | 489 | 198 | 84.6 | 18.6 |
2021 | 635 | 405 | 181 | 25.1 |
% change | +30 | +105 | +113 | +35 |
Ex-div: | 03 Mar | |||
Payment: | 07 Apr | |||