Unite Share Discussion Threads

[kpwf] 08/11/2016 11:59

Maddox - please see my previous post. The trading update refers to an EPS yield of 4.5% and not yield growth of 4.5%.

Is this just based on EPRA earnings?

[maddox] 08/11/2016 11:52

Another positive trading update from Unite this morning covering the current 2016/17 academic year.

Key points:

>> Occupancy 98%

>> Rental growth + 3.8%

>> On track for EPS yield growth of 4.5% for 2016.

>> Market - 2016/17 sees record student numbers up c.40k

The growth in student numbers is further exacerbating the existing under-supply of student accommodation. Another positive point is that the growth has been strongest in Unite's target locations. With a positive outlook and development pipeline of a further 5,500 beds transparency of future growth in NAV and income is excellent and with Reit conversion will be seeing a likely 10% increase in the payout ratio.

The future is of course uncertain but it's difficult to find any points of concern that would explain the recent fall in the share price. As I post the share price is 566p against last reported NAV of 620p as at 30 June.

Regards, Maddox

[kpwf] 08/11/2016 11:46

The trading update this morning is forecasting an "EPS yield" of around 4.5% for FY16.
This as I understand it is earnings as a percentage of the share price - in effect the PE ratio expressed the other way round.

If so, then presumably the 4.5% refers to the EPRA earnings (ie based on rental income only) and not statutory earnings, since based on the statutory EPS already reported for H1 (48.3p), you would expect the yield to be much higher for the full year.

Can anybody help to explain this please.

[maddox] 03/11/2016 11:27

....and as I've said previously - for anyone tracking UTG the shorters are presenting a great opportunity to get in at a good price. But you may need to be quick.

The trading pattern of Unite, and the lack of RNSs suggest that the shares are tightly held by FIs.

[maddox] 03/11/2016 11:21

A tip for Unite investors....

The hedgies have to borrow stock in order to sell short. Typically, the Nominees holding investors' shares will lend the stock to shorters for a fee. If you object to your shares being used to drive down the share price of your holding - you can prevent it. Just place a Limit Order to sell your holding at a much higher price - say for UTG the 770p JPM target. This prevents the Nominee from lending your stock or makes them have to recall it from the shorter.

Regards, Maddox

[maddox] 03/11/2016 11:19

Hi buzztraded,

JPM and Numis are joint advisors and brokers.

Yes, I'm not a great believer in coincidence. I'm sure that Morgan Stanley had a good reason for changing their opinion so radically? I love the phrase they use 'the timing of our downgrade may not be perfect' covering their back side then!

Regards, Maddox

[buzztrader] 03/11/2016 00:17

Hi MaddoxI think 549 could be the floor. One broker comes to the rescue. Not sure if JP Morgan is the house broker. At present, all eyes on the American election till we see any definitive moves. Regards your bear raid theory, it is hard to fathom for a FTSE 250 co.However, American banks are known for this and the worst is JP Morgan.Spin a story, make it believable and then short it.

[maddox] 02/11/2016 23:08

Hi buzztrader,

Hmmm interesting - the share price rose 4.5p today as a couple of the hedgies trimed their short positions only a tad. I wonder which of the hedgies is going to be left holding the baby?

Regards Maddox

[maddox] 01/11/2016 23:02

Hi buzztrader,

Thanks, and JP Morgan Cazenove are sticking with a 770p share price target which emphasizes the disparity of view with MS.

However, the shorters have the upper hand at the moment - especially as they appear to be concentrating their fire power towards the end of the day to force a lower close share price

It'll be interesting to see how easily they are able to buy-back stock to close their positions? Recent rapid share price movements suggests that a small amount of demand can send the share price up like a rocket. A bit of competition for stock between the hedgies and they might generate their own bear-squeeze.

Regards, Maddox

[buzztrader] 01/11/2016 20:55

WowA view contrarian to Morgan Stanleyhttp://www.directorstalkinterviews.com/unite-group-plc-37-7-potential-upside-indicated-jp-morgan-cazenove/412714553

[maddox] 01/11/2016 18:02

Hi buzztrader,

Thanks for your bio - obviously I'm somewhat wary as I usually get very little chat on this board and then your profile is just like a de-ramper's and together with the timing. However, welcome I do appreciate anyone posting, whether positive or negative, but negative comments are actually more useful. It's far better to form an opinion following a constructive challenge.

On the Morgan Stanley opinion piece - yep there is a lot of valid points, however:

#1 Despite the dog-whistle politics of Amber Rudd I find it difficult to believe that the Tory Govt is going to sacrifice the UK Higher Education Sector on the alter of immigration control. A recent report estimated that only 1% overstay! Foreign students are worth about £15bn p.a. to the UK's balance of payments and they don't tend to be clogging up GP surgeries, nurseries with their children, or competing for jobs. Whereas, the Govt have in fact guaranteed the funding arrangements for EU students for three years.

#2 Yes, student accommodation isn't cheap but it's now of superb quality and whilst students are given the loans, those that wish to, can afford to pay the rent. This with a back drop of rising rental sector prices.

#3 Oversupply of student accommodation - this is the really dodgy point. As I said above, there is an existing under supply of new student property and the new-build is running behind the growth in student numbers. Also, there were 180,000 more applicants than places in 2015/16. So it's difficult to draw the same conclusions as MS on this key point.

Regards, Maddox

[buzztrader] 01/11/2016 01:09

Hello MaddoxI started tracking Unite last year when my son started studying in UCL and stayed in their accommodation. Excellent brand new building in St Pancras at £230 per week.It costs £350 but the difference is covered by UCL. They had 100% occupancy and it was slickly managed.I was surprised by the fall as well and see it as a buying opportunity too. However, there is the risk of Brexit affecting the EU and non EU student intake. There is also a strike by the UCL students about the high rentals.As regards my profile, I keep it low. I thought this report could would be of interest to others here and hence posted it. Nothing more, nothing less.BTW, I do follow your posts on Unite avidly.

[maddox] 31/10/2016 23:31

Hi Buzztrader,

Interested to know what you've been doing between now and your last bb post in 2006? You've got no profile info?

Regards, Maddox

[buzztrader] 31/10/2016 22:32

#Morgan Stanley report from FT Alphaville#1: We think that international student numbers could fall as a result ofpotential stricter visa rules for non-EU students, who make up 25% of Unite'stenants, and because EU students, which make up 9% of Unite's tenants, facetuition fee hikes post Brexit vote – university applications from EU students arealready down 9% for the academic year starting Sep 17.#2: Falling affordability for UK students: UK students have formed the majorityof the increase in undergraduate student numbers in recent years, andpenetration has grown more among the less affluent than the more affluent.Less well off students are likely to face increasing affordability issues:i) maintenance grants have been converted to repayable loans, affecting 20% ofstudents (half of whom see the grant as essential for their studies); ii) tuition feesmay rise more from 2017; iii) 77% of recent graduates are worried about theirstudent debt.#3: Risk of oversupply and softening yields: We estimate the current pipeline ofpurpose built beds equates to about a quarter of existing beds. According to ourchannel checks, pockets of oversupply are appearing in some markets anddemand for secondary assets is softening.Impact on our numbers and rating: We cut rental growth from 4% to 3% pa, andnow assume 25bp yield expansion by Dec-17 (was 5bp) – our Dec-17 NAV falls by10%. We increase our target discount to 8% (was 0%) – we are taking away the4% premium for exposure to student assets and the 4% for developments. Wearrive at a price target of 590p (was 700p) (on par with the share price) whichputs it into the bottom third of our order of preference, thus the downgrade toUnderweight. The timing of our downgrade may not be perfect, but we see ahigher likelihood of negative than positive newsflow ahead. We would becomemore positive if Unite were to expand in growth markets abroad.

[maddox] 31/10/2016 09:40

Hi Chaps,

I've been having a look at this dip in the share price and it appears that we have a couple of hedge funds shorting the stock just prior to the Morgan Stanley down grade report - Basso Capital Management & CQS (UK)LLP. Far be it for me to suggest that this is a coordinated bear raid.

What is interesting is that the report is based on the student market contracting and this affecting Unite. However, it might also be expected to also affect ESP and DIGS - whereas their share prices have remained very resilient - DIGS is up as I post.

Also, I'm far from persuaded by the report. There is a huge under supply of student accommodation. Last year 25,000 beds were added but student numbers increased by 60,000. There would have to be some cataclysmic event to bring this market into balance - so I'm satisfied that Unite is still an attractive investment in the short, medium and long-term. Unite's NAV was 620p at 30th June and Morgan Stanley share price target is 590p, other analysts targets are up to 770p so UTG are looking good value at the 550p share price as I post.

What we are being presented with is a great opportunity to buy on the dip. However, as we have seen on previous Unite dips - it tends to be a spike - so you may need to be quick before the hedgies cover their positions and it charges back up again.

Regards, Maddox

[ben gunn] 30/10/2016 17:26

Deadly
I don't think we use P:E for valuing property companies.
12 years ago this company got very overstretched, then it made the FD CEO and sold lots of property onto a fund that still pays them to manage it. As I see it there are few property holding companies with such conservative balance sheets, if they raised more debt (my family holds debt and equity) they might pay a special dividend and cough up higher future dividends.

My guess is that there is some major holder dripping stock into the market, so reducing the price.
But, until the price recovers some TA strength it may be best to wait and see.

[maddox] 28/10/2016 11:48

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.

Regards, Maddox

[deadly] 28/10/2016 08:26

Still a high P/E and low yield compared to many other property companies.
Maybe reality is starting to catch up

[maddox] 24/10/2016 10:08

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.

Regards Maddox

[maddox] 17/10/2016 22:45

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.

Regards Maddox

[maddox] 10/10/2016 22:03

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?

Regards, Maddox

[maddox] 10/10/2016 21:38

Hi Ben,

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.

Regards, Maddox

[maddox] 07/10/2016 12:27

Hi Benn,

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.

Regards, Maddox