Price: 317p, Market cap: £80m

Adjusted profits increase 23%

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LOK reported a strong set of interims, leaving management feeling very upbeat about the outlook. Adjusted operating profit was 17% higher at £2.4m, on the back of a 5% (8% like for like) increase in turnover to £8m. Adjusted EBITDA was up 13% and FFO, management’s favoured measure of cash profits, improved 23% to £3.1m. Adjusted NAV was 14% higher at 307p and the dividend was raised 15% to 2.67p per share.

Operations continue to grow:

Occupancy was up 2.4% year on year on a like for like basis, although unadjusted it was flat. Pricing was up 3.3% YoY and store margins improved nearly two percentage points. The headline operating figures looked good, but were boosted by management fees and pure self-storage revenue was up just 1.4%, following the sale of Swindon in September 2015.

 Pipeline of four assets:

Following the opening of Bristol, Southampton and Chichester in the past few months, management said there were a further four sites in the pipeline. Two of them will be managed stores. The £10m cost of building the other two freehold stores will be funded internally.

 Balance sheet strengthened:

With net debt of just £26m and an LTV falling to 26% the group has capacity to gear up to fund its expansion plans. Cash at the interim stage was £3m, but there is another £3m to come in during the 2H of FY16. The improved terms on the new banking facility should also produce a cash saving from the 2H.

Shares have recovered:

The shares saw a justified bounce after the release, after a prolonged period of weakness since January. With the stock trading on 2% discount to NAV and yielding nearly 3%, we would argue there remains further upside. Our valuation range for this year is 336p-361p.

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