SAFE - Q3 trading update.

Click to visit Safestore investor relations.

Another slow news day today so I have a brief write up on the self storage company Safetore Holdings (SAFE) for you which describes itself in their trading update today as follows:

· The UK's largest self storage group with 134 stores. They include 97 wholly owned stores in the UK and 25 wholly owned stores in the Paris region together with 12 stores under management in the UK.

·  The Company provides storage to around 46,000 personal and business customers.

·  Safestore (excluding Space Maker) has a maximum lettable area ("MLA") of 5.08 million sq ft (including the expansion pipeline stores) of which 3.48 million sq ft is currently occupied.

In their statement today they say after a continued improvement in trading in Q3 and a good start to Q4 that they are confident in producing earnings in line with their expectations. They flagged the following highlights from Q3:

·    Group Revenue trends continuing to improve with like-for-like Q3 2014 revenue in CER1 up 5.4% on Q3 2013

·    Group closing occupancy3 of 68.4% (up 3.0 ppts on Q3 2013) at 3.48 million square feet ("sq ft")

·    Continued progress in the UK with new lets growth of 18.6% driving an increase in closing occupancy of 4.1% to 67.2%

·    UK rate up 2.5% in the quarter and like-for-like revenue growth accelerating to 6.4% from 0.6% in H1 2014

·    French business continues robust performance with CER revenue up 3.0% on Q3 2013 with further improvement in occupancy and rate in CER.

This is an interesting area of the property market which has been a big growth business in the US for a number of years and is becoming more so over here. The growth in households, renting and more divorces etc. have led to a rise in demand for these type of facilities. The extent to which they are used is still some way below the figures in the US but is trending in that direction. Thus it seem to be an interesting growth market and Safestore has a good position in it in the UK and also around the Paris area.

This is what first attracted me to this one which I have traded quite successfully since 2009 when I first bought in at around 75 pence, when it was trading at a big discount to its asset value and offered a decent yield of over 6% too. I did halve my holding at around 150 pence subsequently but then topped it back back up again in 2011 below 100 pence. I then held them until earlier this year when I sold them after a dramatic re-rating took them up to 230 pence, a premium to their asset value and took the yield down to 2.5% or so.

Summary & Conclusion.
An interesting play on an interesting part of the property market, although the valuation is not as attractive as it has been in recent years as the shares have moved to a premium to book which is, I believe, around 180 pence. The yield is around 3% for this year, which is OK but not that spectacular although some strong mid teens dividend growth is forecast for the next two years which is an acceleration on the previous trend growth. The P/E is around 15x next years forecast earnings although I'm not sure how relevant that is for this one. Overall one that remains on my watch list which I might get back into if it drifts off again to sub 200 pence and closer to the asset value, but it doesn't seem like this statement will cause that in the short term.

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