UK universities enrolled a record 512,000 students last autumn, but still rejected more than a quarter of total applicants. This well-founded growth in admissions, combined with a shortage of modern student lets, fuelled growth at Unite Group (UTG), which provides accommodation for 43,000 students in 23 cities nationwide.
Rents rose 3.3 per cent, helping lift the portfolio valuation - and hence adjusted book value (NAV) - by 14 per cent to 434p. Unite's gains reflect vigorous overseas demand, its focus on building high-quality properties in underserved locations and the relentless pruning of its portfolio. Better management of costs has also improved profitability: recurring earnings increased by nearly a half to 17.2p per share.
Unite is on track to add 6,720 more beds by 2018, which it thinks could add 47p to NAV and boost EPS by 13p. Moreover, reservations for the coming academic year have already hit 65 per cent. But the biggest boost could stem from the removal of the cap on university admissions this September. The government predicts this will lead to 60,000 more students converging on UK universities each year.
Broker Peel Hunt forecasts adjusted NAV of 506p by the year-end, and expects a dividend yield of 6 per cent in 2018.
| UNITE (UTG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 518p | MARKET VALUE: | £1.0bn | |
| TOUCH: | 514-519p | 12-MONTH HIGH: | 524p | LOW: 388p |
| DIVIDEND YIELD: | 2.2% | DEVELOPMENT PROPERTIES: | £49.2m | |
| PREMIUM TO NAV: | 25% | |||
| INVESTMENT PROP: | £1.2bn* | NET DEBT: | 81%* | |
| Year to 31 Dec | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 242 | 24 | 12.2 | nil |
| 2011 | 242 | 5 | 1.3 | 1.75 |
| 2012 | 321 | 126 | 78.3 | 4.0 |
| 2013 | 370 | 77 | 46.0 | 4.8 |
| 2014 | 416 | 108 | 53.1 | 11.2 |
| % change | +12 | +41 | +15 | +133 |
Ex-div: 22 Apr Payment: 19 May *Including share of joint ventures | ||||
