StorageVault Canada (SVI-T)

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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Both sides of the border, self-storage is in a more difficult operating environment. Less needed with less housing activity, so pricing power is elusive. Income growth has fallen, more expenses. Getting interesting at these levels. If you own, you could hold and hope for a recovery in 2025.

A more bullish outlook on housing would be a catalyst.

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.

Shares have declined because US storage companies have been pressured, but Canada is different--a lot of less density and it's harder to get storage places approved. No debt problems as SVI continues to buy mom-and-pop shops at good prices.

Declined because US comps are down, and rental rates are pressuring them. But in Canada, there's less density and a better dynamic. Company is run well, and he likes their M&A a lot. This dip is good to buy.

An essential service, and SVI is the only public storage company in Canada. Not a REIT. Have strong organic growth, but also buy companies with a good track record in a fragmented industry in Canada. So there are lots of opportunities to buy smaller companies. They target 4-6% same property growth. Lease terms are typically 1.5-2 years, so prices can be reset. They keep capital costs very low, and are diversified geographically. Defensive. Is 16% below February 2023, so there's room to run.

Weak last quarter, but recovering on renewed guidance for double-digit growth. Unique because of high barriers to entry. Very good at acquiring. Should do well in a recession. Cheap. Falls between industrial and multi-residential.

Great sector, recession resilient, flourishes with life's disasters. Largest operator in Canada. Internal growth 4-6% range, which he thinks is pretty good for a defensive asset class, but the market's less excited. Underperformed this year. Growing cashflow environment.

We would be a bit more interested in SVI in the $4.25 range. The company has done an admirable job building out its business and consolidating its acquisitions. There are still plenty of small operators it can acquire. The stock had an initial big run and now has paused a bit (down 19% YTD) as investors reconsider economic prospects and the company's quite-high debt load. We do not think SVI has done anything wrong, but we would consider it a higher risk position now with higher interest rates and somewhat of an economic slowdown. It may see some tax loss selling. Generally though we like it, but would like it more a bit cheaper to reflect some of the risks here. 
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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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It is the main player in the self storage business which is stable. It has good internal and external growth and is getting more adept in fine tuning its margins since it is such a large operator.