StorageVault Canada Inc.
(SVI-T) C$6.66
Upgrading to BUY; Results Slightly Ahead; Q1/22 SPNOI +18%
Event
Upgrading to BUY from Hold, Q1/22 results, and forecast update
Impact: NEUTRAL
We are upgrading SVI to BUY from Hold on the back of continued strong earnings growth, a very positive outlook, and what we view as a more reasonable valuation. We believe the combination of its short WALTs, high pricing power, and high operating leverage (including low staffing requirements) position StorageVault among the best of any of the names under our coverage to perform in an inflationary environment.
SVI is the largest owner/operator of storage units in Canada, and has demonstrated its ability as an aggregator of assets, generating a track record of outsized AFFO/ share and NAV/share growth. During 2018-2021, AFFO/share growth averaged at 29%, including 15% in 2020 and 47% in 2021. We expect this growth to continue with an average annual AFFO/share growth of 29% over our forecast period, which is among the highest in our coverage universe. It has also generated a NAV CAGR of 28% since we launched on the name back in March 2018 owing to a combination of consistently high same-property NOI growth (averaged 11% over this period, including 18% in Q1/22), as well as a low payout ratio, which has allowed the company to re-invest its cash flow and benefit from acquisitions. We expect continued NAV growth with our one-year NAV forecast +21% to $7.00.
Q1/22 Results. FFO/share (f.d.) of $0.039 was +66% vs. Q1/21 and slightly ahead of our estimate of $0.037. AFFO/share of $0.038 (our calculation) was also slightly ahead of our estimate of $0.037. A slight beat on self-storage NOI drove the majority of the variance vs. our estimate.
Forecasts. Our 2022/2023 AFFO/share estimates increase 2%/3%, and we now expect average AFFO growth of 29% over our forecast period. Our NAV estimate is +4% to $5.80.
Valuation. SVI is trading at a 15% premium to our NAV, in line with the long-term average.
TD Investment Conclusion
StorageVault continues to generate strong earnings/NAV growth on the back of solid industry fundamentals and strong execution by its management team. With a 28% return to our $8.50 target price (increased from $8.00), we are upgrading StorageVault to BUY from Hold.