Opinions
Joshua Varghese
StorageVault Canada
SVI-T
TOP PICK
Oct 08, 2024
$4.870
Stock price when the opinion was issued
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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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Demand endures and it's a low capex business. It trades at only a 5.5% cap rate and 3-4% net operating income growth, down from double-digit but seems to be troughing. Will benefit from lower interest rates as more people move homes and need storage space.
(Analysts’ price target is $5.78)