Big Yellow Group PLC (LON:BYG) has been downgraded to ‘hold’ from ‘buy’ by analysts at Berenberg following a recovery in the share price off its March lows, with the German bank saying the self-storage market was “better prepared” for an economic downturn than previously following the 2008 financial crisis.
In a note on Tuesday, the bank retained its target price of 1,050p on the storage locker firm, saying its trading had “remained remarkably stable since the start of the UK’s lockdown” and the market had “realised the opportunity to invest in Big Yellow’s highly reliable long-term growth story”.
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“Impressively, trading in [the company’s 2021 financial year] has so far proved highly resilient through the initial lockdown phase. From 1 April up to results on 8 June, the company managed to grow both occupancy and rates yoy, while cash collections remained consistent at 97%. While visibility for the remainder of the year is low, we do not expect a material fall in earnings for Big Yellow”, Berenberg said.
Looking to the longer-term, Berenberg said they believed the company’s outlook was “exceptional, with structural growth tailwinds in UK self-storage, and the likelihood that future land opportunities will emerge from the current crisis”.
However, they said a catalyst for the share price was “less clear” and that there was “limited room for a re-rating and little chance for a positive earnings surprise”.
“As a result, we downgrade our recommendation to Hold. In our view, the near-term upside has been largely realised from the company’s re-rating since lows in March”, the analysts concluded.
Big Yellow shares were 2.1% higher at 1,049p in mid-morning trading.