|Looking at the volume - it appears that we have an FI selling and thus depressing the share price This presents an excellent opportunity for topping up. Essentially, nothing has changed, apart from some good RNS news, since they were trading at upwards of 650p.
|Still a high P/E and low yield compared to many other property companies.
Maybe reality is starting to catch up|
|Another RNS today - this time a well located development site acquired for 570 student beds this time in Sheffield. Again, this will be financed (£35) from internal cash flow. Unite's maturing business model will throw off increasing amounts of cash - and with conversion to a REIT that will flow to shareholders.
With a development pipeline of now 5,500 student beds Unite also offers excellent transparency of future growth as well. So asset backed, very conservatively financed (loan to value ~35%)delivering a potent combination of organically generated growth and prospective increasing dividend stream Unite offers a highly attractive risk/reward profile.
|Good news this am; UTG get planning approval for a £70m development in the center of Liverpool adjacent to an existing property currently 99% let. So a perfect fit.
Also, they are going to fund the development from internal resources. As they have just sold two properties for £88.4m realising a nice £34.7m profit(65% on development cost) they have the cash ready to recycle.
So all looking positive based on the news - so why has the share price fallen to as low as 590p?
Well the other players in the market, ESP, DIGS, haven't fallen so it appears isolated to UTG. And, as the news is all positive, I suspect a large FI is re-weighting its holding, possibly taking some gains to invest elsewhere. Once that clears I wouldn't be surprised another rapid climb up to 660p.
|This mornings RNS - the quarterly valuation update on the two student property funds, Unite both manages and has a share in, showed good progress...
'Joe Lister, Unite Students Chief Financial Officer, commented: "The lettings performance for the 2016/17 academic year has again been strong, with occupancy currently at 97% and rental growth of 3.8%.'
So nothing there to suggest why the share price shot-up to c. 650p and has then come straight back down to below 600p?
Just thinking further about your comment about UTG's miserable dividend. Well yes I can see your point, on a trailing basis the current yield is 2.6% - that doesn't look fantastic. However, this is of course a function of the value Mr Market is placing on the shares, currently 595p.
Mr Market appears to highly value UTG such that it is priced more like a bond than an equity. And why not, it's asset backed, is the largest player in a very solid market sector and very conservatively financed so it is not unreasonable that Mr Market is prepared to pay a premium for this surety.
Yet the key difference between UTG and a bond is that a bond does not increase it's pay-out; whereas we can expect UTG to increase it's dividend pay-out over time. The anticipated forward yield for UTG is a more attractive 3.45%. And if the dividend continues to grow then the returns do become fantastic. Based on the averaged prices I've paid the yield I'm getting is over 7% - which is actually reflected in share price growth.
So I doubt UTG will ever look cheap - Mr Market will be prepared to pay a premium to get on board this cash machine.
It has certainly been zig sagging for quite a while and needs something to generate a break-out. The REIT conversion and mandatory pay-out could well be the impetus.
Back down once more since 4th.
As I see it the miserable level of dividend may come to an end since the balance sheet is preposterously strong- market may then re-rate it.|
|Unite has taken off like a rocket this morning up 14.5p 2.26% as I post. Cannot find any news item or RNS to explain this. Anybody have any clues? Regards Maddox|
|Strong set of H1 results & a positive outlook.
EPRA earnings up 22% to £36.1m, EPRA eps up 15% to 16.3p, EPRA NAV up 7% to 620p. Interim div up 9% to 6p/share. Loan to Value 35% - very conservative leverage. IFRS profit including revaluation gains down at £106.7m (2015 £208.3m) due to big uplift last year. Conversion to REIT in 2017.
Ironically, UTG was the share I was most confident was Brexit-proof but took the largest hit!! Whatever, nothing of concern in these figures and outlook statements very positive:
'Despite the uncertainty caused by the result of the EU referendum, the fundamentals of our business and the student accommodation sector remain strong.
The demand;supply outlook for student accommodation remains favourable and our earnings growth trajectory is underpinned by our efficiencies of scale and a high quality development pipeline, focused on cluster flat accommodation with a lower price point, where the rental growth outlook is strongest.'
|Comment in Investors Chronicle -
'There are other (real estate) sectors that really have little exposure to the referendum. One is student accommodation. Building purpose-built units for overseas students reflects the demand for decent accommodation from students coming from Hong Kong, China, and Russia, and elsewhere. Just 5 per cent come from the EU, and with the cap lifted on overseas student numbers, together with a weak pound, the attractions are there to see. Crucially, companies such as Unite (UTG), Empiric Student Property (ESP), and GCP Student Living (DIGS) have had little trouble raising funds to develop their portfolios.'
Unite had a London focused strategy following 2008/9 GEC but more recently moved exclusively out to top regional Cities. This is based on a required initial yield on completed development of >8%. However, it might just be that London is becoming viable again?
I'm looking forward to the 26th results - Unite always provide a lot of insights into the market dynamics and I'm sure that they will have plenty to say this time round. The trading update alongside their fund valuations suggested that Brexit offers little of concern and may offer some opportunities - although very much not my choice of outcome.
|Thanks Maddox, yes every cloud etc. I like the fact that UTG has a widespread portfolio and is not reliant on what happens in London, and has a strong, reliable and growing demand. There is an argument for avoiding central London I think. Obviously the property/land is the most expensive (possibly in Europe) but the high fees for student accommodation forces many to look elsewhere in the UK, where we are well represented.|
Positive update and valuation uplifts on their student property funds - albeit independently valued prior to 23rd June - driven by rental growth and a positive outlook statement 'expect to see continued high demand for purpose-built student accommodation'
Couple of points for your consideration:
aa) Student accommodation is a very different species to commercial property (office and retail primarily);
bb) The cost of developing student property will be dropping along with the fall in commercial property development activity; and
cc) More land will be available at more reasonable prices for student accommodation development.
The financial viability of student property development in Central London was becoming marginal in competition with commercial property development. IMHO the linking of the post-Brexit travails of commercial property with student accommodation is miss-placed. Every cloud as they say.....
|Yes you did and thanks for the reply - my post does seem to have disappeared. My nephew studied in Liverpool and loved the city.
I also said welcome aboard - it would seem very well-timed!
I'm very positive on UTG as you will see if you read my previous posts. I started loading up with UTG in the last global economic crisis, so have little worries with my investment in the current climate.
Back then student accommodation was seen as an exotic asset class and it had much higher and far more expensive debts. Whereas now it is very conservatively debt leveraged with longer-term lower-cost debt. It is thus well-placed to thrive even in the current turmoil.
|Did I see a post asking which city? Seems to have disappeared into the ether.
I'm in Liverpool Maddox. Every shop, office, pub or warehouse that closes down is immediately converted into student accomm. UNITE is very well represented, and I believe their flats are oversubscribed, as most 1st year students want "official" landlords. I'd imagine thats the case elsewhere.
My other investments, mostly gold explorers are picking up after a wretched few years. I'm comfortable having some that will benefit from the uncertainty of the times we are living through-more QE, possible negative interest rates etc, and others, like UTG, who are hopefully immune to the turmoil.|
|Hi Maddox, and thanks for the reply. Been watching UTG and meaning to buy for some time, but kept putting it off for some reason. Bought my first after the overdone drop last Friday am and will add more as funds become available. It's possibly my first stock that is actually making money- been throwing money down the jam tomorrow drain of junior gold explo co's. My home town is becoming a Unite dominated, student swamped city as I'd imagine other places are too. Their accom is very expensive with seemingly growing demand, so high hopes for share price and dividend growth.|
If you wish to have a discussion - start one - what is your interest in UTG? Are you imvested of considering?
OK, I've put my money where my mouth is and leveraged up with more Unite.
|One of the great attributes about Unite is its resilience - Student Property was the best performing asset class during the last recession. It is highly unlikely that Brexit will affect the attractiveness of the high quality education on offer - and its just become more affordable due to the fall in Sterling.
This is against a back-drop of an existing significant under-supply of student accommodation. I note that Empiric have released a positive trading update this morning.|
|Is there a more active message board elsewhere? TIA.|
|Just thought I'd update my investment rationale on Unite as I do regularly.
Firstly, their market is solid and growing and not subject to economic turbulence. Secondly, Unite is asset-backed with 36% loan to assets - very conservatively financed. Hence I judge it as low risk.
Strategically, Unite is the market leader in terms of size, which is always an advantage and it manages more student beds than it directly owns - thus has scale economies. It also manages two student property funds, in which it has a stake, and from which it earns additional fees, those extra beds they manage, and investment management fees and bonuses for superior performance.
With a pipeline of secured property developments stretching out two years - providing transparency of future NAV growth - mitigates the usual investment uncertainty.
On a p/e of 24 and yield of 2.87% UTG doesn't look particularly cheap and I doubt it ever will. However, the yield will certainly get a kicker from the conversion to a REIT. So IMHO I believe that this asset backed, low risk investment, with underpinned NAV growth is under-appreciated and this may in time drive the share price to a premium to NAV. My share price target is 700p to Dec 2016.
|Couple of announcements:
Unite have acquired another site for development - this time for 480 beds in Portsmouth. These are due for delivery in 2018 and will add to the 2,200 beds it already manages there that are let out via the University.
Unite manages the UK's largest student accommodation fund 'USAF'(Unite Student Accommodation Fund) of which they own 23%. They are raising funds through issuing a bond raising £135m at an interest rate equivalent to 2.744%. Such a low interest rate will bring down the cost of the fund's debt a tad and extend the average debt maturity to eight years. The funds will be used to repay maturing existing debt and for further investments. This move thus both increases the funds capacity to invest and yet lowers the funds financing risk - a very neat move.