13th Feb 2023 14:37
(Alliance News) - Lok'n Store is set to have lower earnings per share in financial 2023 than previously anticipated due to high costs, but will have higher earnings in the following years than formerly estimated, Peel Hunt anticipates.
The expected figures are still set to underperform against financial year 2022, as increased operating costs and higher interest costs, due to Bank of England base rate increases, reduce profit.
Lok'n Store shares were down 2.6% to 937.90 pence each on Monday afternoon in London. Over the past 12-months, the stock is down 5.3%.
The London-based self-storage company on Monday said same-store revenue for the six months to ended January 31 increased by 10% from a year ago, while move-ins for the period were up by 14% from a year prior.
Peel Hunt analysts Matthew Saperia and James Carswell downgraded their earnings forecast for Lok'n Store for 2023 by 2% to 32.6 pence per share: "Anticipated cost pressures, as well as increased debt service costs, are mitigating some of the top line growth, although the latter are believed to be shorter term."
Medium-term, they upgraded their forecasts by 3% to 32.5p for financial 2024 and by 4% to 37.2p for financial 2025. This compares to basic EPS of 41.24 in financial 2022. Net asset value per share forecasts by Peel Hunt increased by 6% on average, with an expected NAV of 1,089p per share for financial year 2025.
The uplifted forecasts reflect "a combination of better revenue performance, offset by higher interest costs," Peel Hunt said.
The analysts highlighted Lok'n Store's "very strong medium-term growth opportunity presented by the pipeline...as well as the operational leverage inherent in the existing portfolio and operating platform."
Lok'n Store on Monday noted that price per square foot of occupied space was up 9.2%, with pricing momentum set to remain due to strong demand and good occupancy levels.
The company added that same-store occupied unit space has seen a 2.6% rise compared with a year ago.
Lok'n Store noted cost pressures on business rates and energy, but said it expects these to be short-term and to eventually return to normal levels. Absolute cost level rises are likely to be driven by an increase in its number of stores, the company explained.
The current new store pipeline will add 49% to its owned trading space once developed, Lok'n Store said, noting that there are a number of opportunities beyond its already secured pipeline.
Construction work continues on new store developments in Bedford, Peterborough, Staines and Basildon, all of which are set to open in 2023, Lok'n Store said. The company's Kettering site is due to open in early 2024.
"As we open new stores and build their occupancy, so their value increases significantly. The cash flow from these stores can then fund future growth and an increasing dividend to our shareholders," Chair Andrew Jacobs commented.
The company said it expects net asset value per share at the end of financial 2023 to be broadly unchanged from GBP9.72 per share at the end of financial 2022.
Lok'n Store will release its half-year results on April 24.
By Tom Budszus, Alliance News reporter
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