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The company is expanding in an under-supplied market
Thursday 26 Apr 2018 Author: Tom Sieber

There is a clear route for self-storage play Lok’n Store (LOK:AIM) to double in value if it can execute on its growth plans.

The company provides low cost, secure storage space for households and businesses. Demand for these services has increased due to smaller homes, a more mobile population and people accumulating and then hoarding more stuff.

Businesses, often online retailers, sometimes start in self-storage units and many even become long-term customers of the likes of Lok’n Store.

The self-storage market in the UK looks particularly strong. The latest annual survey by commercial real estate firm Cushman Wakefield and the Self Storage Association UK revealed growth in both occupancy rates and rental rates.

It also showed UK residents rent four times as much space as their counterparts in France and 10 times as much as those in Germany.


Lok’n Store’s success has been in finding and securing sites to serve this undersupplied market. The current pipeline of seven new stores could be expanded near-term with four further opportunities identified and in the hands of lawyers.

Margins should improve as the number of sites ramps up while the central cost platform remains for the most part unchanged. The company both owns stores, which is the case for around two thirds of the portfolio, as well as developing and operating them on a management contract.

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 as the profit figure is impacted by the depreciation of its self-storage sites.

On both these measures recent interim results looked strong with EBITDA up 16.3% and cash available for distribution up 13% and implying an annualised total of 20.5p up from 18p for the July 2017 financial year.


Chief executive Andrew Jacobs is comfortable with forecasts from stockbroker FinnCap, based on ‘simple arithmetic’ in Jacobs’ view, which suggest cash available for distribution could increase to 51p in the next decade.

Based on a 5% yield this implies a share price of more than £10. As the long-term potential comes to be appreciated by the market, we would expect the shares to trade higher. The shares currently offer a dividend yield of around 3%.

A potential constraint on growth is securing land for new sites, which Jacobs concedes is a challenge. Yet as a founder and significant shareholder (18.8%) in the business Jacobs says he will not overpay for real estate. (TS)


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