SingPost: Land scarcity and skyrocketing property prices are expected to drive demand for self-storage spaces in Asia. Despite a possible economic downturn affecting business, the impact could turn positive as more residents downgrade into smaller properties and may end up storing their items instead of disposing them.
Looking to capitalise on this growing trend, SingPost recently acquired Store Friendly Self Storage Group for $12m with another $4m add-on if certain conditions are met.
The acquisition of Store Friendly makes SingPost the current market leader in Singapore with 15 self-storage facilities in the country.
The bullish sentiment was echoed by Extra Space Asia, the second largest operator in Singapore, despite a Jun CBRE report on the Asian self-storage market that pointed to heightening competition in the region even as self-storage sf per capita is projected to rise in Japan (0.17 to 0.42), Hong Kong (0.36 to 0.86) and Singapore (+028 to 0.66) over then next 1 years.
According to the report, self-storage per household was 1.29 sf in Singapore, 1.06 sf in Hong Kong, and 0.32 sf in Tokyo, which point to low saturation.
Indeed, the SingPost’s acquisition of Store Friendly could be seen as a primer for market consolidation due to high start-up costs, competition over suitable sites for self-storage conversion as well as turnaround time required to rent out self storage space. This could prove to be a boon for SingPost as it would offer a barrier to entry for new entrants.
The acquisition could also help support SingPost’s core delivery services as e-commerce businesses are known to rent self-storage facilities to store merchandise. This could thus allow SingPost to cross sell its various delivery services.
SingPost is currently trading at 21.3x forward PE. The street has 5 Buys and 4 Holds on the counter with an average TP of $2.17.
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