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Broker implies there is potential to make handsome gains on the stock over the long term

Storage space provider Lok’n Store (LOK:AIM) looks an attractive prospect as it gears up for the most significant period of expansion in its history.

With a pipeline of 11 new locations set to be opened (mainly in retail locations) out to 2020, the group is positioning itself to take advantage of strong industry dynamics in an undersupplied market.

Chief executive Andrew Jacobs tells Shares that cash available for distribution – basically how much cash can be paid in dividends minus any capital expenditure – and earnings before interest, tax, depreciation and amortisation (EBITDA) are more relevant metrics for Lok’n Store than pre-tax profit.

The profit figure is impacted by the depreciation of its self-storage sites. Broker FinnCap describes that as an ‘accounting quirk’ linked to the group completing its accounts as if it was a trading entity rather than a property firm.

Arguing for the continued growth potential of this niche, Jacobs notes the more mature US market has eight square foot of self-storage space per person against just half a square foot per person in the UK.


FinnCap believes cash available for distribution could increase from 18p in the financial year to July 2017 to 51p in 10 years’ time.

Applying a 5% yield to the implied dividend at this point generates a long-term share price target of £10.08. That implies the shares could go up by 162% over the period, equal to an average 16.2% annual gain (excluding dividends).


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