In a report released today, Simon Chan from Morgan Stanley maintained a Sell rating on National Storage REIT, with a price target of A$2.55.
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Simon Chan’s rating is based on a combination of factors including the cautious outlook on storage fundamentals and the company’s evolving income structure. Despite an increase in the price target to A$2.55/share due to higher medium-term earnings projections, Chan remains wary of the sustainability of recent occupancy improvements, which appear to be driven by increased marketing efforts that could erode margins.
Moreover, while the company’s income from joint ventures is growing, and there are opportunities for new core asset funds, Chan is conservative in his assumptions, predicting only slight increases in occupancy and rates for the coming years. The potential for further sell-downs and the optionality around NSR’s stake in a listed peer add complexity to the investment outlook, contributing to the Sell rating.