Safestore remains secure investment

Safestore (SAFE) makes its money through storing its customers’ worldly possessions. Through good times and bad, it offers people confidence that their items will be safe. Shareholders should be similarly bullish about the safety of their investment. Safestore’s share price, revenues and profits have all trended upwards over the last five years in spite of economic headwinds.

The reason for this is that Safestore’s model capitalises not on a cyclical market trend but from two macro trends. First, as more renters move in and out of big cities, they need more self-storage. Second, as online shopping grows in popularity, businesses need more temporary storage. This is why Safestore is concentrated so much around big cities. It is also why the pandemic and all of the house moving and online shopping which it encouraged caused such a boom for the company. Births, deaths and divorces are also big business for Safestore, and these continue regardless of the economic weather.

An economic downturn won’t leave Safestore completely unscathed, though. The value of its properties is likely to decrease for the same reasons that have hit many other landlords. What’s more, the end of the housing boom and a recession hitting shopping of all kinds could mean less businesses requiring storage, too.

However, forward earnings forecasts look strong, and the company has beaten consensus forecasts for the last two years. Plus, the stock’s current premium to net asset value of 22 per cent is historically cheap considering its 208 per cent premium last year. Buy.

Last IC View: Buy, 1052p, 21 Jun 2022