In a break with our conventional tip format, we're suggesting GCP Student Living (DIGS) as a buy – but not quite yet. The reason for the delayed gratification approach is that at the time of writing the student accommodation real-estate investment trust (Reit) is looking at ways to finance a noteworthy property transaction. Funding may well take the form of a non-pre-emptive placing, which was the case with an oversubscribed £70m, 142p a share fundraising a year ago that enhanced the net asset value (NAV), but coincided with the shares falling by about 5 per cent to the placing price. If history repeats, there could be a more attractive entry point following a placing. But even if the financing of the new deal does not knock the shares, the virtues of GCP's portfolio, the shares' attractive yield and the discount to forecast NAV still make us rate the shares a buy.
Significant undersupply of student beds
High exposure to a supply-constrained London market
Portfolio fully occupied
Dividend currently not covered by earnings
Student numbers could fall