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StorageVault Canada
SVI-T
DON'T BUY
Nov 13, 2024
$3.970
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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In late October SVI did miss estimates, and then saw some broker downgrades. It then made two acquisitions ($10.5M) in early November but there has been no other news of any note. We think it is an OK company but it has a very significant debt load, so we think buyers have some time here to wait.
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