Self-storage sites operator Lok’nStore (LON: LOK) has decided to issue shares to raise cash rather to help finance new store openings rather than purely using debt – even though the facility could cover this. A fundraising includes a REX retail offer to existing shareholders that closes on 12 July. Up to £2m will be raised in this offer.
A placing has raised £18m at 765p/share. The market price fell 22p to 848p. Peel Hunt previously forecast net tangible assets of 958p/share at the end of July 2023, rising to 1012.8p/share the following year. The discounted placing price is likely to reduce the figure, but it is still an attractive discount to net assets.
At the end of June, Lok’nStore revealed second half trading was strong and it is on course for a 10.5% increase in revenues during the period. The annual increase is likely to be 6% to £25.6m.
A new store in Peterborough has just opened, following one opened in Bedford earlier in the year, and this will help to boost net assets at the end of July 2023. That helps to partly offset the declines in existing assets due to higher interest rates.
The 2022-23 pre-tax profit is forecast to fall from £11.4m to £9.3m because of the sale of sites last year. Dividends of 19p/share are expected for this year and there should be 2p/share increases each subsequent year.
Prior to the share issue, net debt was forecast at £44.7m at the end of July 2023, rising to £53.6m one year later. That would have been gearing of around 25%, so it would not have been high.
The investment in new sites will show through in the figures in the coming years as they are opened and then build up the customer base. There are already plans to increase space by 37.7%. Interest charges were set to rise.
Intermediaries involved in the REX retail offer are AJ Bell, Hargreaves Lansdown and interactive investor. Other brokers may become involved. The minimum subscription is £50. The offer closes at 8am on 12 July.
This is a good opportunity for existing investors to add to their shareholding at an attractive price.