Demographics have put the wind in Unite’s (UTG) sails in recent years, as the number of university admissions outstripped the number of available student properties. However, the group warned that external factors, including the vote to leave the European Union, have taken a toll and the UK has also had to contend with a recent decline in the number of 18-21 year olds. This demographic trend is forecast to last for another two to three years, which is obviously an issue for Unite, although there are still more applicants than places offered by universities, and the recently announced review into university fees represents a positive step.
Unite’s property portfolio is increasingly focused on high- and mid-ranked universities, which should be better insulated against current trends. Such institutions accounted for 85 per cent of the total in 2017, up from 82 per cent the year before. This will grow further once the existing plans for development, acquisitions and disposals have been carried out. Indeed, the development pipeline looks healthy, with a secured and university partnership pipeline of 9,400 beds over the next four years. The group intends to fund developments at Oxford Brookes and Kings College London through placing new shares, raising £170m.
The group has decided to increase its dividend payout ratio. From 2018 onwards, it will pay 85 per cent of earnings out in dividends. Analysts at Peel Hunt note that this means the yield on the shares could be more than 5 per cent by 2020. It forecasts an adjusted net asset value (NAV) per share of 776.5p at December 2018 (from 720p in 2017).
UNITE (UTG) | ||||
ORD PRICE: | 779.5p | MARKET VALUE: | £1.88bn | |
TOUCH: | 778.5-780p | 12-MONTH HIGH: | 833p | LOW: 606p |
DIVIDEND YIELD: | 2.9% | DEVELOPMENT PROP: | £206m | |
PREMIUM TO NAV: | 9% | |||
INVESTMENT PROP: | £2.05bn* | NET DEBT: | 46% |
Year to 31 Dec | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2013 | 382 | 81 | 13.6 | 4.8 |
2014 | 434 | 94 | 17.2 | 11.2 |
2015 | 579 | 105 | 23.1 | 15 |
2016 | 653 | 201 | 101.3 | 18 |
2017 | 717 | 229 | 95.3 | 22.7 |
% change | +12 | +14 | -6 | +26 |
Ex-div: | 12 Apr | |||
Payment: | 18 May | |||
*Includes joint ventures |