Unite Group: after the re-rating

Net operating income, a measure of turnover for property companies, grew 4 per cent year-on-year, supported by the completion of various developments. Management also kept a tight lid on costs, so adjusted profit rose 6 per cent to £15.2m, even though 2012's figure was boosted by the recovery of £2.5m in cash deposits from a bust Icelandic bank.

Like-for-like rental growth reached a pedestrian 1.2 per cent over the six months (from 1.8 per cent in 2012) but, judging by advance room bookings, that could quicken. Reservations for October currently cover 90 per cent of the portfolio, up from 87 per cent a year ago. This reflects a jump in student numbers after the hiatus created by last year’s fee hike. As of 27 August, UK universities had confirmed 27,500 more places this year than in 2012 - up 6.5 per cent.

The company also raised £50m in June through a placing at 320p. That reduced Unite's see-through loan-to-value ratio (which includes its share of debt within joint ventures) to 48 per cent, but it also sapped growth in earnings and book value per share. Adjusted book value nonetheless rose from 350p to 361p as the dilution effect was offset by 8p a share of development gains, portfolio revaluations (+7p) and cash flow (+5p). Broker Investec Securities expects net asset value (NAV) to reach 379p by the year-end.

Unite's property revaluations have been driven by rental growth alone for the past three years, but that could change if a major portfolio of student blocks, currently on the market following a bankruptcy, fetches a high price. This looks likely, says Unite's chief executive Mark Allan. "There are more investors looking at student accommodation than I've seen for 10 years."