Bell Potter believes the ASX 300 share in this article may be close to being fully valued.
As a result, the broker has slapped it with a downgrade today, citing concerns about softening sector fundamentals.
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Which ASX 300 share?
The stock that Bell Potter has become less positive on this week is Abacus Storage King (ASX: ASK).
The broker has reviewed the self-storage operator's internalisation plans and current trading conditions. Unfortunately, it thinks both are softer than the market expects.
Speaking about the internalisation, it said:
Earnings uplift on internalisation – Management guided to ~6% pro-forma FFO accretion in FY26 from internalisation cost savings alone. We are more conservative at +4.8% net accretion in FY27, as management fee savings are partially offset by higher interest costs from a larger debt base, the $300m facility upsize, and a rising yield curve.
Internalisation may drive a re-rate, with internally managed REITs trading at a narrower NTA discount (-24.8% vs -31.3% for externally managed). However, recent sector internalisations (BWP, GNZ) have not produced a material step-change in price-to-NTA. While market conditions may explain this, ASK's free float (40.5%) could limit the extent of a re-rate.
As for current trading conditions, Bell Potter isn't confident. It adds:
Management have highlighted rental rate pressure from discounting and competition, consistent with data suggesting street rents have remained broadly flat to slightly negative CYTD. While not expecting near-term yield expansion, channel checks suggest transaction flows have been muted in recent months in response to higher funding costs.
Shares downgraded
According to the note, the broker has downgraded the ASX 300 share to a hold rating (from buy) with a reduced price target of $1.50 (from $1.70).
Based on its current share price of $1.39, this implies potential upside of approximately 8%.
However, it is worth noting that a dividend yield of 4.4% is expected over the period. So, this boosts the total potential return beyond 12%, which isn't bad for a hold recommendation.
Commenting on the downgrade, Bell Potter said:
We downgrade to a HOLD recommendation on ASK with earnings uplift from internalisation cost savings offset by rising funding costs, and a more cautious outlook on rental rate growth driven by increased competition and discounting. We believe earnings growth (BPe +4.8% FY27) is priced in, with ASK trading on 21.5x P/FFO (vs 13.6x passive REIT avg).
