Tag Archives: REIT

Stor-Age Property REIT Limited – FY 26 Results – Tough UK Market but with Room to Grow

Share Code: SSS – Market Cap: R8.8bn – P/B: 0.9x – DY: 6.6%

Stor-Age Property REIT – Results Note – FY 26Download

Summary of Results: South Africa does the heavy lifting

  • Stor-Age’s FY 26 landed in line with our forecast as Distributable Earnings rose +8.4% to R642.4m and Distributable Income per Share growing by +5.1% to 129.29cps. Final DPS rose +5.1% to 116.36cps (maintaining the REIT’s 90% payout).
  • The Group’s balanced sheet remained comfortable, gearing at reasonable-to-low levels (Loan-to-Value or LTV at 27.1%, or at 30.3% on a Look-through basis including JV’s), and the NAV per share growing at +3.7% to 1767cps.
  • Digging deeper, the Group’s South African segment carried the result with its rental income growing +10.5%, net property operating income +11.1%, and same-store rate +8.6%).
  • UK segment lagged with GBP rental income growth of only +1.1% eaten by operating costs growing +4.5% resulting in Net Property Operating Income slipping -0.8%.

Thoughts: UK Should See Better FY 27E

  • Despite the UK miss above, we think that FY 26 was a quality results in a two-speed year with a tougher H2:26.
  • There will be new UK leadership from October 2026 that has sparked an operational review here and should see efficiencies and pricing gains (probably really annualising from H2:27E).
  • AI-driven efficiencies should help medium-term UK margins while AI-pricing transparency in the UK could help the Group’s SA operations (many local operators may not have the AI know-how that the Group is gaining in the competitive UK market).
  • Finally, we will be watching some financing rolls where low-struck hedges (70% of net debt, ~1.3-year average expiry) roll off and potentially reprice higher during FY 27E.

Updated Forecast and Valuation: Double-digit Implied Total Return

  • We update our fair value based on our blended fair value of 1812cps (previously 1850cps) and a 12m TP of 1908cps (previously 1970cps).
  • With the share at 1715cps (it has de-rated since the R500m December raise), the implied 12m total return improves to 18% (previously 16%) — about 11% price return plus a 7.1% Forward Yield.

Stor-Age Share Price relative to Self-Storage Peers:

Stor-Age Property REIT – Results Note – FY 26Download

Stor-Age Property REIT Limited – Valuation Update & Change in Analyst

Share Code: SSS – Market Cap: R7.1bn – PB: 0.9x – DY: 8%

Stor-Age – Change of Analyst Ad Hoc Note – 2 February 2025Download

Reason for this Ad Hoc Note: A change in analyst and resulting review of valuation approach, fair value and 12m TP. Forecasts will be updated following the FY 25E results.

Thoughts: Well-run, Well-positioned & Globally Competitive Self-Storage REIT

  • Stor-Age owns a well-managed, growing self-storage property portfolio that was built out of a strong SA-base (that remains robust and growing) and is increasingly allocating capital towards the UK (Rand Hedge benefits) while cleverly leveraging the somewhat lower balance sheet intensity of JV funding structures to build out what will likely become a substantial portfolio.
  • Rental income growth has been strong, historically outpacing inflation, with SA averaging around 10-11% and the UK around 6-9% over the past 5 years. Occupancy rates are high in owned properties, exceeding 90% in South Africa and around 85% in the UK, while JV properties are still in their lease-up period, with occupancy around 60%.
  • The Group’s Net Property Operating Income (NPOI) margin has been consistently around 74% since FY19.  EBITDA margins are also strong, at 66-67% while financial performance is underpinned by solid cash flows and a history of distributing nearly all Funds From Operations (FFO) as dividends; Note that the company has recently shifted its distribution policy from 100% to 90-95% of FFO, retaining some capital for growth.
  • The Net Asset Value (NAV) per share has steadily increased, providing a solid return and we consider the Group’s balance sheet comfortably/lowly geared.
  • Refer to Annexure A and Annexure B whereby we further review the Group’s history and examine the global self-storage market and Stor-Age’s listed peers around the world.

Valuation and 12m TP: Relative Model and Dividend Discount Model Used

  • Interestingly, Stor-Age’s share price has not kept pace with NAV growth, leading to a current Price/Book (“PB”) ratio of 0.8~0.9x. Given what we consider conservative valuations of its underlying investment properties, the potential for both Rand Hedge benefits from its UK portfolio, optionality for organic and acquisitive growth, we think that the share should (at least) track its historic c.1.0x PB ratio over time.
  • We determined the fair value for Stor-Age by using a Relative Valuation Model and a Dividend Discount Model:
    • Relative Value: Our fair value is R15.90 per share
    • Dividend Discount Model: Our fair value is R14.57 per share.
    • Equal-weighted average valuation: Result is R15.23 per share.
  • Rolling this fair value forward, we arrive at a 12m Target Price of R17.10 (Previously: R16.73); factoring in dividends, we expect this to generate a 12m Expected Return of ca 24% from the current share price.
  • Note that the international peer averages used exclude some USA peers due to differences in accounting practices, namely, that their investment properties are not fair valued on their balance sheet. This distorts their PB ratios and makes PB comparisons difficult.
Stor-Age – Change of Analyst Ad Hoc Note – 2 February 2025Download