Stor-Age bucked the REIT trend


Stor-Age bucked the REIT trend


Published Date: 2021-06-10 | Source: INCE|Community | Author: The Finance Ghost

Stor-Age bucked the REIT trend

There are a few REITs on the JSE that are different from the rest in that they focus on unusual asset classes. Stor-Age is the only JSE-listed REIT that owns a portfolio of self-storage facilities, which faces completely different fundamentals to other REITs.

During the big sell-off in 2020, I felt that Stor-Age was the baby thrown out with the bathwater. Malls were empty and office tenants were begging for relief. Storage units were a different story, with people continuing to pay to store their excess stuff in these facilities.

In fact, as people downsized their lifestyles to survive financially, I felt there was a good chance that demand for these facilities would be strong. As a result, I invested in Stor-Age last year.

The latest newsflow is that Stor-Age has released its annual earnings for the period ended March 2021.

The company owns 74 self-storage properties, split across South Africa (52) and the UK (22). The local portfolio is valued at R4.7bn and the UK portfolio is valued at R2.9bn. In the UK, the brand is Storage King. There are a further seven properties that operate under the Storage King brand under licence, which generates additional revenue for the group.

Rental income is up 19.3% but that excludes rental guarantees and underpins. Total property revenue is up 14.5%, which is still a solid result over this period.

Like-for-like rental income was up 8.6% in SA and 6.3% in the UK. This highlights the importance of securing new sites for expansion, as any growth above like-for-like rental income is achieved by opening more storage parks. The group has an existing pipeline of nine further sites.

Occupancy rates are similar across the two countries: 90% in SA and 90.4% in the UK. Importantly, rental collections are also exceptionally high at 98% in SA and 99% in the UK.

So, Stor-Age has a lot of tenants in its properties and manages to collect almost all outstanding amounts from them. This validates the view I took last year that Stor-Age would be resilient over the lockdown periods.

Although top-line revenue performed well, distributable earnings only increased by 0.4%. The total dividend per share for the year was down -5.3%, although this must be read in the context of many REITs missing their dividends in the past year.

The company placed importance on a strong balance sheet, raising R250m in an oversubscribed bookbuild in May 2020. Dividend reinvestment plans helped the company retain cash as well. Although the dividend per share was diluted, the group focused on protecting the business and ended the year with a Loan-to-Value (LTV) of 24.1%, which is low by REIT standards.

The net asset value per share is R12.98, up from R11.49 a year before. At a share price of R13.50 at time of writing, the company is trading at a premium to book value (although not to the extent of Sirius that I highlighted this week).

The total dividend for the financial year was 106.80 cents per share, a trailing yield of 8%.

Disclaimer: the author holds shares in Stor-Age


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