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U+I set for record trading gains

The developer's pipeline makes the shares look very undervalued
April 26, 2017

Developer U+I (UAI) had already warned that development and trading gains for the year to February would be hit by a slowdown in transactions following the referendum, so a fall from £51m to £35m came as no surprise.

IC TIP: Buy at 185p

However, looking ahead paints an altogether brighter picture, with gains for the current financial year expected to nearly double to £65-£70m, the highest level to date, and that's on existing projects alone. And there's plenty more in the pipeline. U+I has won four public/private partnership projects with a gross development value of £1.5bn. These are expected to deliver development gains of at least £90m a year in 2020 onwards.

Savings of £2m are expected to come from a reduction in net recurring overheads. Part of this will come from concentrating on a smaller number of larger schemes, rather than lower revenue generating schemes where the cost base remains relatively high.

Rather than building a bigger and bigger balance sheet, U+I continues to concentrate of redistributing excess cash back to shareholders: this was the third year in succession that a special dividend has been declared.

Analysts at Peel Hunt are forecasting adjusted net asset value (NAV) of 302p per share at the year ending February 2018, from 277p a year earlier.

U+ I (UAI)
ORD PRICE:185pMARKET VALUE:£231m
TOUCH:185-190p12-MONTH HIGH202pLOW: 140p
DIVIDEND YIELD:3.2%TRADING STOCK:£208m
DISCOUNT TO NAV:33%
INVEST PROPERTIES£234m**NET DEBT:35%

Year to 28 FebNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20132510.82.05.6
201426219.514.95.6
201527634.826.85.9*
201629125.817.55.9*
2017278-1.7-2.45.9*
% change-4---

Ex-div: 20 Jul

Payment: 17 Aug

*Not including special dividend of 8p in 2015 and 2016, and 2.8p in 2017, ex-div 11 May and payable on 16 Jun

**Including joint ventures and associates