Empiric gets 'A*' on results day

Investors marked Empiric Student Property's (ESP) shares up 5 per cent on the morning of its results after it beat analysts' predicted upgrades. The student accommodation landlord's EPRA earnings per share soared 18.5 per cent in the six months to 30 June, outdoing analyst Stifel's already bullish prediction of 16 per cent growth and highlighting the continued need for student digs.

Meanwhile, Empiric's gross margin increased by two percentage points to 72 per cent, which the company pinned on its "continued focus on operational efficiency". Soaring rents no doubt helped as well, with the company predicted further growth of 9 per cent next year as the lack of available student accommodation continues.

John Cahill from Stifel gave the company an "A* on A-Level results day" for its better-than-expected figures, but there are a couple of areas where we would write “needs improvement”.

First, acute as the need for Empiric’s product is, it remains heavily dependent on international students, who account for around half of its tenants. The government has been pursuing a tough line on student immigration recently. However, Empiric chief executive Duncan Garrood says the measures are less likely to hit the Russell Group universities it targets and are more likely to hit secondary universities. 

Even then, if anything were to hit international student numbers, Covid-19 has shown that Empiric will struggle because its rent roll changes year on year. In an attempt to diversify its rent base, it is now targeting postgraduate students with specialist accommodation. It will help, but the nut it needs to crack is the market for UK-born students.

Still, These are hypothetical problems for what remains a first-class student landlord. Buy.