Type “self-storage” into Google and the first entry that comes up is the Safestore website. The company, about the same size as its rival Big Yellow in the UK but with a French arm, spends £5 million a year on the dark arts of website search optimisation, trying to ensure that when customers seek somewhere to park their surplus goods, they latch onto a Safestore in their neighbourhood.
The market is, in the company’s word, “brand-blind” despite the fact that the two biggest players have highly distinctive fascias. It is also relatively undeveloped — more than 70 per cent of Safestore’s new customers have never used self-storage before. This suggests there is plenty of growth to come for all.
One limiting factor is the availability of new sites. The companies are competing with logistics firms that want “big boxes” in secondary industrial locations as distribution hubs to serve the move to online shopping. In some cases, residential developers are also in the race. Safestore has five new stores in the pipeline, one outside Paris.
It also has the advantage of an agreement to buy Space Maker, a self-storage portfolio with 12 outlets, for £43 million, a move that would mean a significant increase for its 95 stores in the UK. Safestore is the only buyer and already manages the portfolio.
Aside from new openings, there are two main drivers to the business. The company entered the financial crisis with too many stores in the pipeline, and these took time to fill up. Its occupancy rate, at 70 per cent plus, is well below its rivals and is inching upwards. This means there is still the equivalent of about 30 empty stores to fill and gain rental from.
In addition, the amount paid per square foot is also advancing as less profitable long-term customers move out and are replaced by more lucrative short-term business. Debt is relatively low for the sector and cashflow is strong.
All of the above give Safestore some built-in growth during the next few years, which rivals do not necessarily enjoy. As that empty space fills, the benefits should drop straight through to the bottom line.
The shares, up 7¾ p at 350p, have been strong performers. They sell on a premium of more than 25 per cent of net assets, but the growth is there.
MY ADVICE Buy
WHY Self-storage is not always a well understood market, but it gives good exposure to continuing high property values
Consort Medical
In many ways it is Consort Medical’s misfortune that a disproportionate amount of attention has been paid over the past couple of years to Voke, the cigarette alternative it is developing with British American Tobacco. The company is not able to comment but with the device already cleared by the health authorities for a year now, it is obvious there are some technical hitches to be overcome. The prospect is still that it will launch in the next year.
Voke is increasingly less crucial to Consort, though. The company, which makes drug delivery devices, agreed in late 2014 to buy Aesica, which makes pharmaceuticals. The figures to the end of April show that this is seeing strong progress, with margins up on cost savings and the sale of some underperforming business. At the original core of the business, Bespak, revenues were up by 11 per cent and earnings by more than 20 per cent, as those higher sales meant greater use of its production facilities.
Add in the first full year from Aesica and pre-tax profits were ahead by 42.5 per cent at £32.3 million. The company has also announced that the client for its next big product, an asthma inhaler, is Mylan, which is producing a generic rival to the market leader. To put this into context, one analyst believes the annual revenues from this, at £30 million, should be about equal to those from Voke.
I advised against buying the shares at the end of last year. Off 11½p at 941p, they sell on a much more reasonable 17 times earnings.
MY ADVICE Buy
WHY Rating is reasonable given the growth prospects
Mulberry Group
They do things differently on Planet Fashion. Shares in Mulberry, the luxury bag producer and retailer, were almost £25 in 2012, before the disastrous decision to go upmarket and increase prices to rather more than even the average wealthy shopper was prepared to countenance. They were flat at £10.37½ after results that show some early signs of recovery.
They still do not sell on any meaningful multiple, nor are they expected to over any reasonable timescale — that share price has little to do with expected earnings per share of 10p in the current year. The decision to maintain the (uncovered) dividend at 5p does not exactly move the dial either.
The bull points for Mulberry are clear enough. It gets 14 per cent of sales from its digital business and this can only grow as it is launched in the US this summer.
Its exposure to overseas markets is fairly limited for a fashion group. The new range, which will be fully available from August, has been well received. Its integrated model sees half of its handbags produced in the UK, with potential for further efficiencies. None of this goes close to justifying that valuation, though.
MY ADVICE Avoid
WHY Shares look far too highly rated despite potential
And finally...
I have often wondered how, in these markets, the smaller stockbrokers manage to survive. Plainly Charles Stanley has asked itself the same question. The securities business was sold to Panmure Gordon last summer for a song. The company is now a wealth and asset manager, and we must henceforth remember not to call it a broker. The last set of results, to the end of March, drew a line under the sale, though the company still reported a small loss. It goes forward as a profitable business, albeit in a very competitive market.