Last year Prophet Invest recommended a BUY on the popular REIT: National Storage, at a share price of $1.68. They had excellent fundamentals and an attractive dividend. Should I Buy NSR in 2021?
National Storage REIT, NSR, has delivered excellent returns for investors over the past decade, averaging 11.7% annually. And this is before excluding its lucrative dividend yield.
NSR has performed well and delivered excellent returns for investors in the past decade.
National Storage REIT: Current Price
At the beginning of 2020 NSR reached all-time highs. Today the National Storage share price is $2.10, which is at the upper end of its 52-week range of 1.775-2.21.
About National Storage REIT
National Storage REIT (ASX: NSR) is an Australia-based internally managed and integrated owner and operator of self-storage centers in Australia and New Zealand. The Company has approximately 146 self-storage centers under operation or management, providing storage solutions to over 50,000 customers across Australia and New Zealand.
National Storage manages approximately 77,200 storage units across approximately 7,54,000 square meters of the net lettable area around Australia and New Zealand. Approximately 125 self-storage centers are owned by National Storage Property Trust (NSPT); over 16 self-storage centers are operated as long-term leasehold centers and over three third-party managed centers.
The Company’s self-storage centers are located at North Queensland, Sunshine Coast, Brisbane, Gold Coast, Sydney, Hunter & Central Coast, Canberra, Melbourne, Geelong, Adelaide, Hobart, Perth, Darwin, Auckland, Hamilton, Wellington, Christchurch and Dunedin (Profile source: Reuters)
Should I Buy NSR: COVID-19 Resilience
All 182 NSR centers across Australia and New Zealand have remained open and operational throughout the COVID-19 pandemic. Storage revenues continue to demonstrate the resilient nature of the self-storage asset class to economic volatility. Self-storage was classified as an essential service during the Level 4 Lockdown restrictions in New Zealand, and as a result, NSR was able to continue to provide access for other essential service providers and those requiring access to storage for essential items.
NSR has put in place a range of upgraded hygiene and safety practices, to safeguard the wellbeing of staff and customers. This includes a contact-free move-in process wherein customers are able to book storage online, receive an email with all relevant details, and move their goods into one of NSR’s facilities without the need for physical assistance from or contact with staff.
Balance Sheet & Debt Facilities
As disclosed to the market on 7 April 2020, NSR has obtained increased documented facilities of $125m from its club banks, plus a commitment from J.P. Morgan for a new facility of $100m, in addition to $80m of undrawn pre-existing debt facilities.
NSR has no debt maturities until July 2021 with a weighted average debt expiry of 3.2 years as of 31 March 2020. In addition, NSR’s 31 December 2019 gearing of 36% is well within its LVR covenant of 55% and its ICR of 3.9 times compared to a covenant of 2.0 times.
Expenditure, Acquisition & Development Deferral
NSR has implemented a range of cost saving and capital expenditure deferral initiatives across its business until there is greater certainty as to the medium-term economic impact and likely duration of restrictions related to COVID-19.
NSR’s acquisition and development pipeline remains strong. However, any uncommitted projects prior to March 2020 have been placed on hold for the immediate future. This, in combination with the deferral of some projects during recent takeover discussions, has resulted in the deferral of some acquisition and development-related income for the current earnings period.
In addition, a general macro-economic weakening in overall economic conditions, customer sentiment and discretionary spending, together with an expected increase in unemployment, has resulted in NSR moderating its same-center earnings forecast for the current earnings period.
Should I Buy NSR: Distribution History
Since 2014 NSR has managed to maintain a steady flow of income for investors, even during COIVD-19. Here’s their extraordinary history. Their current yield is 3.52%.
Distributions are typically paid twice a year, in December (interim dividend) and June (final dividend).
Being a REIT their distributions have no imputation credits.
What is NSR dividend policy?
NSR understands the importance of distributions for investors whilst maintaining prudent liquidity. They target a distribution policy of 90% – 100% of underlying earnings.
Increased Debt Facilities and New Bank Lender
National Storage REIT (NSR) on 7 April 2020 announced that it had obtained a $125 million increase in debt facilities from its existing club banks and the extension of an NZ$50 million facility due to expire in 2020. Further, NSR announces that it has received a commitment from J.P. Morgan for a new, additional $100 million debt facility, pursuant to which J.P. Morgan will accede into the existing club banking arrangements.
Managing Director Andrew Catsoulis said that the support shown by its financiers had been, and continues to be, an important part of NSR’s success. It was excited to welcome J.P. Morgan into its club banking arrangements and appreciative of their ongoing support. These new arrangements have substantially increased NSR’s liquidity position, ensuring it is well placed to execute its business plan in the future.
Together, these new debt arrangements increase NSR’s total debt facilities to $1,175 million and undrawn debt capacity to $314 million. NSR remains well within all of its debt covenant limits and is within its target gearing range of 25-40%.
Update on Negotiations with Public Storage
On 14 February 2020, National Storage REIT (NSR) announced that it had received an unsolicited non-binding indicative proposal from Public Storage (PSA) to acquire 100% of the issued stapled securities of NSR for a cash price of $2.40 per NSR stapled security and that PSA was undertaking non-exclusive due diligence of NSR.
PSA has advised NSR on 18 March 2020 that in light of the current environment following the onset of COVID-19, it has determined not to pursue an offer for NSR at this time.
On 18 February 2020, National Storage REIT (NSR) had announced that it had received a confidential non-binding indicative proposal from Warburg Pincus (WP) to acquire 100% of the issued stapled securities of NSR for a cash price of $2.20 per NSR stapled security and that WP was undertaking non-exclusive due diligence of NSR.
On 23 January 2020, National Storage REIT (NSR) had announced that it had received a confidential non-binding indicative proposal from Gaw Capital Partners (Gaw) to acquire 100% of the issued stapled securities of NSR. In follow up announcements, NSR advised the market that Gaw’s indicative proposal price was $2.20 per NSR stapled security and Gaw was undertaking non-exclusive due diligence of NSR.
As we can see there is a lot of interest in the acquisition of NSR, at the time these price targets were relatively high, showing a lot of faith in NSR shares.
Should I Buy NSR: Financials
In February NSR released its Half-year results with the following highlights;
- A-IFRS profit after tax of $101.4 million
- 1H FY21 underlying earnings of $39.2 million, up 14%
- 1H FY21 underlying EPS of 3.9cps
- Total assets of $2.81 billion, up 14%
- Net tangible assets $1.72 per stapled security, up 4.2%
- 18 acquisitions totaling $258 million settled in 1H FY21
- 19 active development projects providing NLA pipeline of approximately 130,000m2
- FY21 underlying earnings guidance range revised to 8.1 – 8.5cps
These excellent results are complimentary to the resilient nature of their business model, even in a period of economic tightening and recessionary periods NSR has delivered growing results.
NSR is focusing to drive organic growth across its 180+ storage centers and executing a strong pipeline of acquisition and development opportunities. It is strategizing for multiple revenue streams to maximize returns. National Storage’s newly developed center occupancy was tracking ahead of the target during the first 18 months.
It is on track for circa 80% within 4 years from opening. Its revenue is forecast to grow at 5.5% per year which is faster than the Australian market (4.2%). NSR has become profitable over the past 5 years, growing earnings by about 62% per year.
National Storage REIT: Investor Sentiment
After surveying 258 Investors about their current NSR sentiment: BUY-HOLD-SELL as well as their target price over the next 12-months here are the results;
The results from this survey show there is currently a strong BUY sentiment on the NSR share price.
Should I Buy NSR: Fundamental Analysis
|Volume 4W Avg||1,699,660|
|NTA per Share||$1.72|
Should I Buy NSR: Technical Analysis
In summary, the upside is likely to prevail as long as $1.99 is a support. The alternative scenario is that a downside breakout of $1.99 would call for $1.92 and $1.88.
Here’s a breakdown of the detailed Technical Factors;
Should I Buy NSR: Prophet’s Take
NSR has a resilient business as exemplified through its result in such a challenging and volatile environment. NSR has also implemented a range of cost-saving and capital expenditure deferral initiatives. NSR’s acquisition and development pipeline remain strong. National Storage has received multiple non-binding indicative proposals at a higher cash price for its issued stapled securities. Prophet considers is bullish on NSR at the current price of $2.10.
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