Big Yellow Group Share Valuation Attractive, Says Goldman

Goldman Sachs upgraded Big Yellow Group (LON: BYG) to Buy from Neutral in a note this week, citing an attractive valuation and strong fundamentals. 

Analyst Rebecca Parker, who assumed primary coverage of the stock, also raised the price target to 1,140p from 1,110p. 

The shares are currently trading up over 3% on Wednesday 943p. However, they are down more than 21% over the past 12 months and 7% in the past month.

Goldman highlighted several reasons for the upgrade, including Big Yellow's “rental rate growth and a strong development pipeline,” as well as improving indicators in the broader market. 

The bank also noted a pick-up in Google searches for storage and signs of housing transaction growth, both of which could support demand for self-storage services.

The report further pointed to Big Yellow’s “competitive positioning” in the UK storage sector.

In the company's first-quarter trading update earlier this month, CEO Jim Gibson said the company saw “some softening of demand and loss of occupancy at the start of the quarter due to elevated levels of macroeconomic uncertainty.”

However, he noted they had delivered a strong average rate growth of 5% through its yield management processes, which resulted in 3% revenue growth for the quarter compared to last year.

Gibson added, “We saw some improvement in demand through the quarter, which has continued into July, with improved year-on-year occupancy performance. Our customer base remains stable with move-outs lower than last year.”