StorageVault Canada Inc.
(SVI-T) C$6.63
Q2/22 Results Largely in Line; SPNOI Growth of +13.6%
Event
Q2/22 results and forecast update.
Impact: NEUTRAL
Overall, SVI had a solid quarter, highlighted by SPNOI growth of 13.6%. While the SPNOIG in Q2 marks a moderation from recent quarters (last 4 quarters averaged ~21.5% SPNOIG), it follows a very strong comp of 25.2% in the prior year. Going forward, SVI will continue to lap difficult comps for the remainder of 2022. We were encouraged to see SVI already surpass its 2022 acquisition target of "over $100mm in acquisitions" with ~$217mm or 8 stores acquired YTD. We view SVI's ability to continue to source acquisitions positively especially given the current uncertain macro backdrop along with the increased competition within its core market of Ontario, where 7 of the 8 stores were acquired. We are now assuming SVI completes $50mm of unannounced acquisitions in H2/22 and $75mm in each of 2023 and 2024.
We continue to believe that SVI is one of the best-positioned REITs/REOCs in our coverage to perform well in an inflationary environment, given its short- term leases, high pricing power, and high operating leverage.
Q2/22 FFO/share (f.d.) of $0.045 was below our estimate of $0.053, largely due to higher acquisition and integration costs associated with the 7-store acquisition in the quarter. That said, upon backing these costs out, AFFO/share was largely in line with our estimate. Beats on both self-storage and portable NOI were partially offset by slightly higher G&A and financing costs. As expected, SVI also announced a 0.5% dividend increase in its dividend.
Forecasts. Our 2022/2023 AFFO/share estimates increase 3%/4% largely on higher NOI offset partially by higher interest costs. We have also introduced our 2024 AFFO/ share estimate which calls for 19% y/y growth. Our NAV estimate is +9% to $6.00.
Valuation. SVI is trading at a 11% premium to our NAV, below its long-term average a 17% premium.
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. We are maintaining our BUY rating while increasing our Target Price to $8.00 from $7.50.