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StorageVault Canada
SVI-T
BUY ON WEAKNESS
Apr 12, 2023
$6.110
Stock price when the opinion was issued
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Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research
SVI operates in a structure relatively similar to a REIT but is much more growth-focussed. It needs to utilize debt in order to be able to grow its portfolio of assets which it rents out. It has also grown primarily via acquisition. The rising rate environment has created cost pressures, however we do think the outlook is positive. As Canada has already begun cutting rates, we think SVI stands to benefit from lower interest expenses (bottom-line expansion) and being able to isse more debt to finance growth (top line expansion). The industry is capital intensive so while high debt is a risk, it is somewhat unavoidable. We like the outlook for SVI.
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SVI has grown very nicely via acquisition of self-storage units.
Revenue has doubled in three years. It remains unprofitable, but cash flow is now positive.
Debt is VERY high at more than 20X cash flow, and remains the main risk. Insiders own 2% directly but 35% through holding companies.
Good growth is expected.
While we like the strategy and it has done well enough, the debt keeps our enthusiasm checked.
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