Nesi Chetty, a fund manager and head of property at Stanlib, said Stor-age is a good defensive stock with a strong property portfolio and solid offshore growth.
Stor-age is a real estate investment trust (REIT) specialising in the self-storage property market.
It is the largest self-storage property fund in South Africa, with properties valued at R9.26 billion under management.
Stor-age, listed on the JSE in 2015, has 85 properties in its portfolio with a gross lettable area (GLA) of 485,800 square metres.
It has a geographical split of 55 self-storage properties in South Africa and 30 self-storage properties in the UK.
Chetty picked Stor-age as a good stock to own because of its strong defensive portfolio that has gone through Covid-19 without being significantly affected.
He said a particular highlight is how the company has increased the occupancy rate of its properties to 88.1%, as shown in the chart below.
Another positive is Stor-age’s offshore growth and increasing its asset base through the pandemic through organic funding.
Its portfolio’s low (LTV) loan-to-value ratio – a measure of the size of loans in the group relative to the value of the properties it finances – is another positive sign.
The chart below shows how Stor-age’s LTV increased up to 30% from 2017 to 2020 as the portfolio grew and the acquired properties increased.
However, the group lowered its LTV to 24% in 2021 before increasing it to 28% the following year.
Stor-age demonstrated that it could increase its portfolio size and manage its debt during tough economic conditions.
As a REIT, the main focus for investors is Stor-age’s dividend yield and ability to pay dividends.
The group has consistently paid dividends since listing and, apart from one year, has been able to increase dividend payments.
The group has an attractive 8.4% dividend yield and has kept its dividend payout ratio low. It paid out 48% of its earnings in its latest financial period.
However, it needed to increase its payout ratio in 2019 and 2022 to maintain its dividend level.
Since listing, Stor-age has maintained stable dividends and could cover all dividend payments with only its rental income from properties.
It also has healthy liquidity, growing its cash to R220 million in the latest annual report.