Lok’n Store set for big ex­pen­sion

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

Shares - - CONTENTS -

Fin­nCap thinks the shares could hit £10

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 longterm 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). SHARES SAYS: Buy at 385p.

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.