Unite chief executive Mark Allan complains about the "disconnect" between the stock market's treatment of the company's shares - off over 20 per cent this month alone - and "some of the strongest operational performance we've seen".
Certainly these results paint a picture of robust recovery at the student accommodation specialist. Adjusted net asset value (NAV) is up 5 per cent since the start of the year to 310p - almost double the share price - mainly thanks to strong rental growth, which boosted both recurring profits and property valuations.
Some investors fret about the impact on Unite of the government's near-tripling of tuition fees next year. But, with 200,000 more applicants than university places this year, less demand is unlikely to have much impact on Unite. Moreover, in a more market-oriented system, Mr Allan expects the popular universities - where its halls are based - to gain students at the expense of weaker ones, allowing it to maintain its rate of rental growth at the current 3-4 per cent .
Another worry concerns Unite's net debt, which has crept back up to £391m due to the group's London development pipeline. Mr Allan maintains the debt:equity ratio is conservative and the scarcity of bank finance brings a competitive advantage for Unite relative to smaller rival developers.
Broker Evolution expects year-end adjusted NAV of 323p.
UNITE (UTG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 161p | MARKET VALUE: | £258m | |
| TOUCH: | 160-162p | 12M HIGH / LOW | 232p | 153p |
| DIVIDEND YIELD: | 0.3% | TRADING STOCK: | £107m | |
| DISCOUNT TO NAV: | 36% | |||
| INVEST PROPERTIES: | £397m | NET DEBT: | 93% | |
| Half-year to 30 Jun | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 232 | 12.1 | 6.1 | nil |
| 2011 | 252 | 16.3 | 9.5 | 0.5 |
| % change | +9 | +35 | +56 | – |
Ex-div: 12 Oct Payment: 11 Nov | ||||
