Operating under the UHAL brand, Amerco is the leader in the North America “do-it-yourself” moving and storage industry. The UHAL brand is by far the most well recognized and most dominant brand in the industry. With 20,000 locations and a fleet of over 200,000 moving trucks, Amerco has about 50% market share and is much larger than its main competitors Budget and Penske. Amerco enjoys multiple competitive advantages including: economies of scale, network effects, dominant brand recognition, cross selling between self-moving & self-storage, and high quality management.
Amerco has leveraged its domain position in moving truck rentals to expand into the self-storage segment. The company now owns over 38 million square feet of storage space at more than 1100 facilities. The self-storage segment is very synergetic with the self-moving segment since many people that move also require temporary storage space for their possessions. Amerco’s self-storage properties are a hidden asset. If the company spins them off into a REIT in the future, they could unlock shareholder value. Comparable self-storage companies trade around 14X revenues. This implies about $3B value for Amerco’s self-storage real estate – about 40% of the company’s current market cap.
Amerco’s self-moving segment is growing at over 8% per year and its self-storage segment is growing at about 5% per year. We expect these growth rates can be sustained for many years into the future since the company faces no material technological or competitive challenges. Amerco’s business lines are recession resistant since more people choose to self-move in difficult economic times. During the 2008 financial crisis, Amerco’s business was not materially affected.
Valuation is also attractive, with Amerco trading at an estimates P/E ratio of 14, 8 times cash-flow from operations and 8 times Enterprise Value to EBITDA.
The above commentary has been excerpted from a letter to clients of Emerging Value Capital Management.
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