Lilliputian homes are becoming the norm. The living room of a new-build today is a third smaller than one built in the 1970s as developers squeeze more properties onto dwindling plots of land. But since our love of buying stuff remains uninhibited by our lack of space, self-storage centres Lok’nStore, Safestore and Big Yellow are flourishing.
Aim-listed Lok’nStore is itself Lilliputian next to its listed rivals, with a market capitalisation of £273 million (Safestore and Big Yellow’s market values are over £2 billion). Its revenues have surged in recent years, with same-store takings up 11 per cent to £13 million in the six months to February, but its shares are off 10 per cent over the past year, and now trading at about 907p.
The stock still isn’t cheap, though —changing hands at 29 times predicted earnings for this year.
Still, the firm’s long-term growth plans, with 11 stores in the pipeline set to add nearly 50 per cent to its total space, look worthy of backing.
The Hampshire-based Lok’nStore has grown from 29 sites in southern England in 2018 to 40 today. Another unit has just opened in Bedford, and builders are working on four in Peterborough, Staines, Basildon and Kettering, which are due to open by the end of the next financial year. Meanwhile, there is £40.3 million cash on Lok’nStore’s balance sheet, some of which is earmarked for investing in its pipeline.
Guy Hewett, an analyst at finnCap, Lok’nStore’s house broker, predicts a 55 per cent increase in the share price “supported by the current pipeline, with more to come as sites are added”.
The growth plans are not extreme — Lok’nStore is conservatively managed under Andrew Jacobs, its founder — and unlike its listed rivals, the firm is not structured as a real estate investment trust, so doesn’t need to pay out 90 per cent of its earnings to investors. Its dividend yield is 2.3.
The interim dividend was upped by 15 per cent in April — a 12th consecutive annual increase.
Its petite size also gives Lok’nStore a final potential attraction for investors — as a possible takeover target. Either Big Yellow or Safestore could use it to scale up, while a traditional property titan may be keen to muscle in on a (relatively) more stable part of the sector.
As retail and office real estate markets adapt to big structural changes, self- storage continues to grow — and with valuable pricing power in the current inflationary environment. Space is becoming an ever-more precious commodity; buy in to Lok’nStore.
