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Empiric still in clearing

The student landlord is hopeful a lag in international bookings will unwind before the new academic year
August 12, 2021
  • Landlord expects 75 to 85 per cent occupancy for 2021/22 year
  • Outlook depends on last-minute international student bookings

Amid concerns about school-leavers’ grade inflation and the degraded quality of the pandemic-era university experience, it’s easy to forget that the clamour for higher education remains sky high.

Prime university accommodation landlord Empiric Student Properties (ESP) is hoping the latest UCAS data – a 4 per cent rise in student applications and a 3 per cent uptick in offers for the coming academic year – will translate into improved occupancy levels. Although EU student numbers are set to fall, non-EU international applications are up 14 per cent and interest from two core Empiric markets, China and India, looks much better.

Still, half-year results show the group isn’t out of the woods yet. Enduring international student concerns about Covid-19 restrictions mean Empiric’s highest quality rentals are still down on the historic run-rate. But a rise in the proportion of UK student bookings has pushed up overall occupancy for the coming year to 70 per cent.

Management expects that to climb to between 75 and 85 per cent, a level that buries any concerns around bank covenants. Although no dividends are declared for the period, cash generation is deemed strong enough for a 2.5p a share distribution – to cover minimum income commitments for 2019 and 2020 – to be paid in the fourth quarter.

Consensus forecasts are for EPRA net asset value to rise to 110.9p per share by December 2021, and to 117p a year later, suggesting the recovery has further to run. Recent portfolio sales above book value, the mooted takeover of rival GCP Student Living (DIGS) and student demand for face-to-face learning provide extra confidence that sentiment isn’t too far ahead of events. Hold.

Last IC View: Hold, 77p, 17 Mar 2021

EMPIRIC STUDENT PROPERTY (ESP)  
ORD PRICE:103pMARKET VALUE:£619m
TOUCH:102-103p12-MONTH HIGH:103pLOW: 52p
DIVIDEND YIELD:nilDEVELOPMENT PROP:£24.9m
DISCOUNT TO NAV:3%NET DEBT:53%
INVESTMENT PROP:£969m   
Half-year to 30 JunNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2020106.6-14.4-2.391.25
2021106.27.01.16nil
% change-0.4---
Ex-div: n/a   
Payment: n/a