Shareholders in Unite (UTG) have had some tough years. Suppliers of student housing have gone from strength to strength, but Unite - once the poster boy - has been held back by its debt. Yet a second distressed rights issue looks increasingly unlikely and, even after a strong year, the shares trade at a sizable discount to book value. There's still plenty of recovery potential left for investors who buy now.
IC TIP:
Buy
at
271p
Tip style
Speculative
Risk rating
High
Timescale
Long Term
Bull points
- Strong underlying market
- Tidying up portfolio
- Access to finance
- Big discount to underlying NAV
Bear points
- Too much debt
- Short-term lettings weakness
True, unlike many property companies, Unite's problems are self-inflicted. It recovered from the property crash with a rights issue in 2009, but its debt levels still look high for a company that has created more bricks-and-mortar than cash. Including its share of joint ventures, in June the loan-to-value ratio was 54 per cent.