Peel Hunt ups rating on Big Yellow

The investment bank, which has changed its recommendation to ‘hold’ from ‘reduce’, also trimmed its price target for the self-storage provider, to 1,200p from 1,300p.

It said: "Big Yellow once again reiterated its confidence [it its business model] and noted that construction cost concerns are now easing. Combined with a correction in land prices, this should be beneficial to future development.

"Overall, this is once again a strong set of results, and we expect to upgrade our earnings per share and dividend per share forecasts by around 5%, to 57.5p and 46.0p respectively.

"The shares trade on a 20x PE and offer a 3.9% dividend yield, and following an approximate 30% decline in the share price in the year-to-date, we upgrade to ‘hold’ while lowering our target price."

Big Yellow reported on Monday a 97% plunge in half-year pre-tax profits in the six months to 30 September, to £6.8m, because of a revaluation loss. But revenues jumped 15% to £93.8m, while like-for-like store revenues strengthened 8%.

The increase in revenues was driven by an 11% increase in the underlying average rate over the period, which more than offset a 2% year-on-year decline in occupancy, Peel Hunt noted.

As at 1330 GMT, shares in Big Yellow were down 2% at 1,138p.