Make space for Lok'nStore

Lok'nStore has reclaimed ground lost during the indiscriminate stockmarket sell-off, driven by a much better-than-expected set of full-year results. Analysts have rushed to upgrade forecasts, and with the economy improving and a number of new stores due to open over the next 18 months, the self-storage firm is understandably bullish.

Adjusted pre-tax profit forecasts have been revised up by 6% at broker finnCap, which now expects £2.2 million in 2015, up from £2 million in the year to July 2014. It's also increased estimates for adjusted net asset value for 2015 by 9% to 277p, up from 271p last year, and to 293p in 2016.

But at 215p, Lok'nStore shares still trade at a big discount to net assets, which, according to finnCap, makes no sense. That's why it reckons the shares are easily worth that 2016 NAV figure. It's also worth noting that larger listed rival Safestore trades in line with NAV, while Big Yellow trades at a 10% premium. So, Lok'nStore's growth appears not to be reflected in its rating.

A 12.4% increase in unit occupancy and 5.8% hike in prices for rented self-storage units grew revenue for the year by over 7% to £13.9 million. And with costs under control, adjusted cash profit jumped almost 12% to a record £4.6 million.

Total store profit in the self-storage business, a key performance indicator of profitability and cash flow of the business, rose nearly 13% to £6.1 million, and occupancy grew by 5 percentage points to 69.5%. New stores will clearly affect that figure, but it's no bad thing.

"The new sites we're opening are more prominent, so they'll get to cash flow neutral more quickly," chief executive Andrew Jacobs told Interactive Investor. "They'll make a contribution in their second year of operation, and by years three and four it will be very substantial."

Lok'nStore had been quiet on the development front since the financial crisis, but its Maidenhead site opened last December and is "trading well", development of the new reading store is almost complete, and work on the Aldershot site began in July. New stores in Southampton and Bristol are earmarked for development next year.

"We were already trading nicely, but now that's reinforced by new stores and replacement stores so there'll be a further positive effect on sales and earnings momentum," says Jacobs. In fact, he's so confident that the annual dividend goes up by 17% to 7p a share.

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