National Storage

About the author:

Author name:

By Fiona Buchanan

Job title:

Co-Head of Research, Senior Analyst

Date posted:

23 May 2016, 1:44 PM

Sectors Covered:

Property, AREITS

Key points

• National Storage REIT (NSR) has announced further acquisitions located in South Melbourne and Wellington, NZ. The assets are all due to settle in May 2016 and will be debt funded.
• We had previously assumed there would be no further acquisitions settled in 2H16 so have adjusted our forecasts accordingly. FY16 acquisitions now total around A$130m (with cA$70m settling in 2H16).
• We continue to assume A$75m in acquisitions in FY17, which may prove conservative.
• NSR now owns and manages a portfolio of 100 centres across Australia and New Zealand with further acquisitions expected given the fragmented market.

Further assets acquired

NSR remains acquisitive leading into financial year end with the acquisition of three storage centres located in South Melbourne (A$12.5m) and Wellington, NZ (NZ$25m). Settlement on all assets is expected in May 2016 with the NZ assets remaining conditional. This brings total 2H16 acquisitions to around A$70m, which have all been debt funded.

Changes to forecasts

We had assumed there would be no further acquisitions settling in 2H16 so have adjusted our forecasts accordingly. Based on our forecasts, drawn debt currently sits at A$243m (vs NSR's facility total of A$294m) and gearing (net debt/assets) is approximately 38%. We continue to assume around A$75m in acquisitions in FY17, which may prove conservative given the current run rate. FY16 guidance remains unchanged with underlying earnings of A$29m-A$29.5m (vs Morgans at A$30.4m). We note that around A$40m of 1H16 acquisitions were included in guidance.

Investment view

NSR offers investors exposure to a leading brand in self-storage with a diversified portfolio. NSR now owns and manages a portfolio of 100 centres across Australia and New Zealand; a scalable operating platform; organic growth opportunities; future growth potential via acquisitions/new partnerships; increasing recurring income streams; and an attractive distribution yield.

We retain our Hold recommendation with an upgraded share price target.

More information

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Disclaimer(s): Analyst owns shares.

The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.