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Unite Group profiting from the return of university students

It will be hopeful that the last national lockdown is behind us and restrictions on international students begins to ease.
Unite Group profiting from the return of university students
  • EPRA earnings were up 18 per cent for the first half of the year.
  • UCAS application growth of 4 per cent is promising.

Student accommodation provider Unite Group (UTG) has swung back into profit in its half year results. The property company had to raise £300m last June to cover its losses after all students were asked to vacate campuses but its recent results have shown a return to pre-tax profits.

Its EPRA earnings, which excludes gains/losses on investing and trading property, were up 18 per cent to £88.3m compared to the same period last year thanks to 96 per cent rent collection for the 2020/2021 academic year. The combination of the increased EPRA earnings and a valuation gain of £54.3m contributed to the profit before tax increase to £130.4m.

If you are looking for dark clouds on the horizon, there might be some concern that the government proposal of mandatory vaccinations for university students plus continued travel restrictions might lower demand. But there has already been quite a lot of backlash on the vaccine policy and the 4 per cent increase in UCAS applications suggests there isn’t much Covid-19 hesitancy amongst future students. Alongside this, the government is considering easing travel restrictions from the EU and US in the near future. Assuming there are no fundamental changes to the travel rules, Unite is targeting 95-98 per cent occupancy for 2021/22 and rental growth of 2-3 per cent.

It has been a good six months and Unite’s rosy forecasts suggests it thinks that Covid-19 risks are in the past. The market already seems to have acknowledged this with the shares trading at 36 per cent premium to its NAV. Hold.

UNITE GROUP (UTG)   
ORD PRICE:1,143pMARKET VALUE:£ 4.56bn
TOUCH:1,142-1,144p12-MONTH HIGH:1,191pLOW: 793p
DIVIDEND YIELD:1.7%DEVELOPMENT PROPERTIES:£236m
PREEMIUM to NAV:36.0%   
INVESTMENT PROPERTIES:£4.57bn*NET DEBT:34%
Half-year to 30 JunNet asset value (p) (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2020822-73.9-20.40.00
202183313032.76.50
% change+1---
Ex-div:16 Sep   
Payment:29 Oct   
*Includes £974m in joint ventures.