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Lok'nStore in expansive mood

Storage space set to grow by a third
October 29, 2018

Growing demand for self-storage space helped to lift profits at Lok’nStore (LOK) in the year to July, boosted additionally by the opening of three new stores. And there are three more stores opening in the current financial year, with a further five sites secured.

IC TIP: Buy at 397.5p

Growing customer awareness has also helped to shorten the time for a new store to fill, with the latest opening filling up the fastest of all. Of the 29 stores open, over half were trading above 70 per cent occupancy, with a third of revenue coming from businesses and two-thirds from household customers.

Lok’nStore prefers to own the freehold on its stores but around one-third of its trading space is leasehold, with an average unexpired lease term of just over 11 years. Margins are lower on leasehold property because of the rent payable, but the return on capital is higher than on freehold because the latter require much greater expenditure on buying the land and building.

The group also manages a growing number of stores for third-party owners. The investor provides all the capital for the project and pays operating expenses out of the revenue earned. For Lok’nStore, there are no costs and no capital at risk, and the managed stores are operated under the Lok’nStore banner.

Analysts at house broker finnCap are forecasting adjusted pre-tax profit for the year to July 2019 of £4.9m and EPS of 13.4p (from £4.7m and 13.1p in 2018).

LOK'NSTORE (LOK)   
ORD PRICE:397.5pMARKET VALUE:£117m
TOUCH:395-400p12-MONTH HIGH:445pLOW: 353p
DIVIDEND YIELD:2.8%DEVELOPMENT PROPERTIES:£16.6m
DISCOUNT TO NAV:17%NET DEBT:31%
INVESTMENT PROPERTIES:£120m   
Year to 31 JulNet asset value (p*)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20142710.40.87
20153022.77.88
20163865.516.69
20174164.011.010
20184805.313.111
% change+15+34+18+10
Ex-div:29 Nov   
Payment:11 Jan   
*Adjusted net asset value