Yesterday saw a new IPO Abacus Storage King (ASK) -4.26% commence trading after raising $225m as they de-stapled the storage assets from the traditional Abacus Property (ABP) business and by definition created a direct competitor to NSR. As we said yesterday we felt the IPO was a bit complicated, however, they raised at $1.41, with the stock finishing on Thursday at $1.35. We did not participate in the deal with the decision looking justified after the stock closed at a discount to the offer price. At $1.35, the real estate investment trust with a portfolio of self-storage and work spaces has a market cap of $1.774bn.
- We believe NSR which has recently confirmed guidance are a business of higher quality than ASK.
When ASK sought bids at $1.41 it was on a -10.1% discount to NTA (Net Tangible Assets) which illustrates they had to try fairly hard to attract buyers. Conversely, when NSR raised $325mn in March it did so at a discount of under 7% to its previous close of $2.51 and the stock fell less than 5% when it recommenced trading illustrating the market’s positive attitude to the $3bn business. However, the relative valuation of ASK which closed yesterday well below its NTA has weighed on NSR which was actually trading above its NTA prior to the pricing of the ASK deal.
- We believe the recent weakness of NSR courtesy of the ASK float is an opportunity to enter NSR whose estimated 12-month yield of 4.8% should underpin its share price.
Also, NSR is an interest rate-sensitive stock which assuming we are correct and global bonds have peaked the stock and sector are becoming more attractive, especially as we believe the ABP/ASK news has largely been absorbed by the market as NSR drifts under $2.30 i.e. if we are correct and bonds reverse lower over the coming weeks/months then NSR should enjoy the macro tailwind.
- We believe the “bad news” around ASK and higher yields are baked into the NSR share price providing excellent value under $2.30.
In terms of Goodman Group (GMG), it’s been a disappointing position in our Flagship Growth Portfolio over the last 2.5 years falling further than we anticipated when growth stocks were revalued as rates rose and then not fully embracing the recovery. With a large portion of GMG’s revenue coming from development, future value add may be hard as the company struggles to find projects which stack up as construction costs have skyrocketed. While they’re prudently being patient we must consider what can/will push the share price well above $20 in at least the short/medium term.
MM is considering buying NSR & potentially funding with GMG
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Goodman Group (GMG) v National Storage (NSR)
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Goodman Group (GMG) v National Storage (NSR)
