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A closer look at Stor-Age’s FY results

Resilient operating performance but an effective reduced overall full-year dividend.
Image: Supplied

Despite rental income, net property operating income and overall property revenue showing double-digit growth for JSE-listed Stor-Age Property Reit in its financial year ending March 31, 2021, the group reported a marginal improvement in distributable earnings and a decline in its dividend per share (DPS) for the full year on Wednesday.

South Africa’s largest self-storage property fund trumpeted that rental income and net property operating income were up 19.3% and 20.2% respectively, while its property revenue was up 14.5% to just over R800 million.

However, its actual distributable earnings were up just 0.4% (to almost R454.4 million) according to its results Sens statement.

Read: SA listed property rallies to top world table

While Stor-Age chose to highlight the fact that its final (second-half) cash dividend of 54.08 cents per share is up 4% on the interim or half-year dividend, its total DPS for the full year was in fact 5.3% down on the prior full year.

Its Sens statement reveals that its DPS for the financial year to the end of March 2020 came in at 112.05 cents, while DPS for the latest full-year (to March 2021) was 106.08 cents.

This is partly due to an equity raise in May last year and the dividend reinvestment plan (Drip) option to shareholders for its prior year’s results, which effectively increased the number of shares the fund has in issue.

Nevertheless, the fund posted a strong operational performance which also shows that it has reduced its loan-to-value (LTV) ratio, from around 30% to 24.1%, and increased overall occupancies to above the 90% mark.

Stor-Age’s stronger balance sheet position, compared to other JSE-listed property funds, also saw its net asset value (NAV) per share increase 13.7% by full-year end, from 1 119.29 cents to 1 272.8 cents.

The fund’s share price was up 0.45% following the release of its latest results on Wednesday, closing at R13.44.

It is currently trading at a premium to NAV, unlike most of the other real estate investment trusts (Reits), which are still trading at discounts to NAV.

Stor-Age, which has 74 self-storage properties and investments in South Africa and the UK valued at around R7.6 billion, also boasts a dividend yield of over 8% currently.

The group said in a results media statement that it “delivered an excellent operating performance in the face of Covid-19 lockdowns”.

“With a healthy balance sheet, the group also continued to execute its growth strategy and bought a self-storage property in Blackpool [UK], as well as opened two new properties in SA post year end,” it added.

Read: Stor-Age’s new R1.1bn UK self-storage JV with Moorfield

Commenting on the performance, Stor-Age CEO Gavin Lucas said: “The past year was one of historic extremes that unequivocally affirmed the resilience of Stor-Age’s business model. The group’s continued exceptional performance in unprecedented times has cemented our ability to outperform sustainably.”

He attributed the group’s agility in the pandemic to its specialist sector skills and experience.

“Combined with its high-quality property portfolio and digital capability, these competitive advantages enabled it to continue extracting occupancy and revenue growth in SA and the UK.”

Despite the negative impacts of lockdowns in both countries in the first half of the year, the group pointed out that it closed out the year with record occupancy levels of 90.1%.

“Supported by strong demand and performance in both markets, the value of the group’s properties increased by R493 million to R7.57 billion,” it added.

“This means that since listing in November 2015, the number of properties in the portfolio has grown from 24 to 74 and the value has risen significantly from the starting value of R1.3 billion,” Lucas noted.

Meanwhile, at year end Stor-Age had cash on hand of R471 million, which was bolstered in May 2020 by R250 million of new equity raised in an oversubscribed bookbuild.

“Overwhelming investor support in an extremely uncertain period further affirmed the sustainable resilience and strength of the business model,” said Lucas.

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I wouldn’t get too excited about this stock, as the barrier to entry is low and the degree of competition in this sector is high.

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