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Hi afrc,
With respect to Brexit some buy-side analysts had argued that Unite would suffer from a drop in EU students. However, as they comprise only 6% of the total student population a drop will not have a significant impact, and it is unlikely that they would stop coming all together even if they have to pay the same rate as other international students. In fact, applications from EU students were up 2% last academic year. Also, if Brexit drives Sterling down then UK becomes a more affordable destination.
Similarly, Unite is often competing for development land against other commercial developers - which if affected by a slow down causes land prices to drop and improves margins.
Nevertheless, have a look at the Unite chart following the Brexit referendum - Unite's share price fell dramatically as Mr Market seemed to see it, incorrectly IMO, the same as commercial property; which was seen as being very much at-risk. It was a wonderful buying opportunity and one cannot guarantee how Mr Market will perceive a hard Brexit for example?
One of Unite's attractions to Institutional investors as part of a portfolio is that it is uncorrelated with the other investments and thus adds risk-diversity. For example, most other investments will be susceptible to a market recession, whereas the education sector doesn't tend to be affected. If job opportunities are few, people will often decide to study and improve their qualifications, so demand might actually increase. Purpose-Built Student Accommodation (PBSA) was the best performing asset class during the last Global Economic Crisis - when it wasn't very mature as an asset class.
Unite isn't a share that keeps you awake at night, asset backed, strong demand, with long-term university contracts and a pipeline stretching out three to four years - it looks a pretty safe investment to me.
Regards, Maddox
Unite has staged a dramatic climb in share price from the recent low of 797p on the 27th Dec to what today looks to be, if it holds, a new all-time high. Currently over c.925p as I post. So c.16% in about a month.
I get the impression that there aren't many personal investors in Unite and that it's Financial Institutions that are moving the sp; which is why the moves can be large in either direction as they look to transact at scale.
What is also interesting is that looking at the recent reported daily transaction volumes seem to be declining whilst the share price is rising? This suggests that the Unite stock is tightly held and that the price rise is not managing to entice-out sellers to satisfy demand.
Regards Maddox
Despite the negative sentiment created by a few recent analysts opinions the balance of Broker recommendations is overwhelmingly positive:
Strong Buy........14
Buy................3
Neutral............4
Sell...............1
Strong Sell........3
So out of 25 - 17 or 68% are on the Buy-side.
regards, Maddox
Source: Share.com
On the forecast share price of 125p Vodafone will be yielding c.11% if the dividend payment is maintained at the current level. So without the benefit of seeing the detail of the RBC and Macquarie reports, it's clear both are predicting a substantial cut to the dividend.
As the new CEO has stated that the dividend will be maintained at the current level - one has to wonder how bad circumstances would need to be to force a change of policy? It's not a decision that a new CEO is going to take lightly.
Unite provide additional updates on the progress of the two student property funds that they run.
Today’s RNS provides the independent Quarterly Fund Valuation Report for these funds’ performance for the year to 31st Dec 2018.
The two funds are:
USAF – Unite own 25% - like-for-like asset value growth of 5.0% for the year; and
LSAV – Unite own 50% - like-for-like asset value growth of 8.4% for the year.
So, an excellent performance for the year, and obviously a very encouraging read-across to Unite's full year results to be reported on 27 February.
The current year trading has also "started strongly" with 67% rooms sold for the 2019/20 academic year that starts Autumn 2019.
With Brexit-deal, or no-Brexit deal Unite's investment case is looking compelling. I find Unite a very reassuring place to have one's money against a backdrop of economic and political uncertainty.
Regards, Maddox
Vodafone's shares continue to languish in the doldrums. The primary concern for most of 2018 was threats to the dividend and would it be cut. This was finally allayed by the H1 Results on the 13 November but the negative sentiment had firmly rooted. Why Vodafone's Investor Relations and PR teams didn't address these concerns earlier is puzzling to say the least - surely that's what they are there for?
Now I presume Vodafone is suffering from Brexit uncertainty - which has led to some Financial Institutions to regard the UK as 'Uninvestable'. Whatever your stance on Brexit, with regards to Vodafone, this concern looks to be overdone.
In the H1 report it states:
"Although we are a UK headquartered company and have put in place necessary contingency planning, a very large majority of our customers are in other countries, accounting for most of our revenue and cash flow. Each of our national operating companies is a stand-alone business, incorporated and licensed in the jurisdiction in which it operates, and able to adapt to a wide range of local developments. As such, our ability to provide services to our customers in the countries in which we operate, inside or outside the EU, is unlikely to be affected by Brexit. We are not a major international trading company, and do not use passporting for any of our major services or processes."
Indeed, UK revenue accounted for only 20% of Vodafone's European revenue and 14% of Group. Once the Liberty deal goes through The UK share of revenue will drop further to an estimated 12.6%.
With Vodafone's dividend secure and looking Brexit-proof that 8.5% yield is looking very attractive. Also, being declared in Euros, it's hedged against £Stg weakness. If Vodafone's UK revenues do suffer from Brexit it's likely that it will be more than off-set by currency translation gains elsewhere. So, IMHO Vodafone looks like its due for a re-rating but how long this will take is anyone's guess - but in the meantime we can collect those lovely dividends.
Regards Maddox
At very long last Sajid Javid, The Home Secretary has published the White Paper proposals for the post-Brexit Immigration System. Obviously the more controversial proposals have taken the headlines, such as the £30k salary threshold debate, however there are some welcome proposals for UK Universities catering to foreign students:
"The White Paper proposals will also ensure there is no limit on the number of genuine international students, who can come to the UK to study. Proposals extend the time they can stay post-study to find employment to six months for those who have completed a bachelor’s or master’s degree and 12 months for those who have completed a PhD."
hTTps://www.gov.uk/government/news/home-secretary-announces-new-skills-based-immigration-system
The UK has been taking a very hard line on foreign students by not allowing them, as other counties do, to stay on for a period to gain work experience after graduating. Essentially, they are a soft target towards reducing UK immigration numbers.
However, a The Home Office paper published last year on “exit checks” data – a proper count of all people who are actually known to have left the UK – found 176,317 – 97.4% – of 181, 024 international students from outside the EEA left on time. This itself is probably an underestimate as others in the remaining 2.6% might have also left but via routes not subject to exit checks, such as via Northern Ireland.
Foreign Students are estimated to contribute £25bn to the UK economy and play an important role in supporting the UK University Sector through the high fees they pay. Other countries' more welcoming attitude towards foreign students means that they are growing their numbers far more strongly than the UK. Hopefully, this White Paper will make the UK more attractive once more.
Regards Maddox
Unite has been bumping up against the 900p mark over the last month - but have smashed through that and up 13p as I post to 912.5p. I'm patiently waiting to see to see another University Partnership deal announced - they have been clearing the decks for action for several months. Perhaps Mr Market has picked up on something?
Unite returns to the London market for the first time since 2013 with a University Partnership Deal for a 1000 bed development. The advantage of a partnership agreement is that the financial return is underwritten by the University, in this case Kings College. There is a shortage of accommodation for Universities to place their first year and foreign students. So a 'nomination' agreement with Unite to allow the Uni to allocate the beds to their students suits both partners. Regards Maddox
Sage fell out of bed today down c.77p >9% on their Q1 Trading Update. The explanation is that re-training of their sales team has caused a blip in sales momentum. Unfortunately, as they have been setting expectations towards 'accelerated growth' - this was not what Mr Market was looking for and has reacted accordingly. This was clearly not part of the plan - and is on the eve of a Sage Capital Markets Day in London. This I expect to be an up-beat presentation of Sages' plans for world domination of the 'business (accounting) solutions' sector. We'll see whether they can restore confidence in these plans and a quick recovery in the share price after tomorrow. This is not the first time that Sage have caught us out with a weak first quarter - only to then as promised again today - recover the lost ground by the full-year end. Regards, Maddox
Unite have issued a strong trading update and positive outlook statement today that supports the recent momentum we�ve seen in the share price. The full year results to 31st Dec 2017 will be out 21st Feb. As well as Unite�s wholly owned student digs Unite runs two student property funds of which they own a percentage. Today�s RNS also provides the independent Quarterly Fund Valuation Report for these funds� performance for the year to 31st Dec 2017. The two funds are: USAF � Unite own 23% - like-for-like asset value growth of 5.6% for the year; and LSAV � Unite own 50% - like-for-like asset value growth of 9.2% for the year, I presume benefiting from the Aston deal. As a result of this Unite expects to receive an additional performance bonus of c.�3m. So it�s safe to say the full results are going to be strong in February. This will also be Unite�s first year as a REIT and will now have to pay-out 75% of EPRA earnings (bonus excluded) as dividends. I�m thus expecting to see a nice uplift in the 2H dividend - target 23p for the year up 25%+ on the previous year. Nevertheless, there are good prospects for more to come. The base investment case is underpinned by the pipeline of 7,500 new beds to be delivered by 2020. On top of that they will be looking for more University Partnership deals, like Aston - where they bought the whole campus accommodation or Oxford Brookes - where they are building to-order with a pre-let agreement. They have a number of these under review. The impact of a good deal can I think be seen in the heightened performance of the LSAV fund over that of the USAF in the figures above. With a loan to value below 32% currently, a new �500m loan and with their fund support they have plenty of capacity to do similar deals. Regards, Maddox
Well despite the share price dip and some negative press comments IMHO there are some very positive points that are either being missed or ignored. Firstly, on the trading update Sage have reconfirmed their guidance for FY 2017 of at least 6% growth and 27% margin. Ok, no change so what? Well what is interesting is that the full year targets are not changing even though they are spending $850m on a fast growing but loss making US Cloud Financial Systems business ‘Intacct’. One might have expected that this together with the funding costs and other two recent acquisitions might dent the results a tad – but no. Also, the US payments business now being disposed of has provided a further drag on growth. The implications of all this are that growth is accelerating but is being masked by the investments Sage are making. Similarly, whilst not significantly impacting the top-line numbers the new Cloud products are gaining customers and move to SAAS pricing and service transformation are all proceeding well. This situation is not likely to continue indefinitely at some point quite soon the revenue growth and margin improvements is likely to become clearly visible. When it does the current pause in the share price appreciation will end and a further re-rating is likely.
Hi EJL7, happy to attempt an explanation of: "The reduction in profit before tax in the first six months of 2017 is the result of lower valuation gains due to property valuation yield compression experienced in 2016." In straightforward terms Unite's property portfolio value didn't increase by as much in 2017 as in 2016. The gains or losses on revaluation are included in the statutory profit figures reported. As they had a large uplift in property values in 2016, not repeated in 2017, it made it appear that profits had fallen on a comparative basis. The substantial rise in values in 2016 was driven by Financial Institutions chasing this class of property - as they were prepared to pay more to acquire a property the rental yield received falls or is "compressed" in the jargon. Hopefully, that makes it more clear? Regards Maddox
Unite have delivered another strong set of results at the half year. The EPRA *(standard measure) Net Asset Value per share rose 7.9% year-on-year to 669p per share and EPRA earnings 11.9%. The interim dividend has been raised 22% to 7.3p. I've spotted an article by Josh White on Sharecast 'Unite Group lifts dividend as profits slide' HTTP://www.digitallook.com/news/news-and-announcements/unite-group-lifts-dividend-as-earnings-slide--2787311.html) This 'slide' is because the property valuations haven't risen as strongly this year than last. So, as this is included in that statutory figures - on a comparative basis profits have fallen. It is due to this distortion that EPRA figures are used to standardize the measures of performance. So Josh ain't wrong but that headline is somewhat misleading. Unite's outlook is positive for the 17/18 academic year with record levels of bookings at 91% reservations - and with the clearing yet to take place. The development pipeline is also looking very strong with 7213 beds through to 2020 (wholly owned) and a further 1407 in USAF (23% owned). Regards Maddox * EPRA = European Public Real Estate Association - the industry body for REITS. 'EPRA eps' is their defined measure of profit after taxation excluding property revaluation gains/losses and intangibles.
Ahead of the half-year results, due on the 26th July, today we have the Quarterly Fund Valuation Report that gives a good early indication of performance. As well as Unite’s wholly owned student digs Unite run a couple of student property funds of which they own a percentage: The two funds are: USAF – Unite own 23% LSAV – Unite own 50% These funds are independently valued for their large financial institution investors, and the good news is that USAF is up 0.9% and LSAF up 0.5% during the quarter. Also, ‘Reservations for Unite's portfolio stand at 89% for the coming 2017/18 academic year, compared to 87% at the same time last year, and is supportive of achieving target occupancy of 98% across the portfolio and rental growth of 3.0% - 3.5% for the full year.’ So solid progress is likely to be reported on the 26 July with strong demand and the outlook is positive for the full year. I note Mr Market likes the news and has marked the shares up 11p to 651p as I post. Regards Maddox
Investors Chronicle have tipped Unite in this week, following the results: Bull points: >> Record reservation levels >> Strong earnings visibility >> Solid rental growth >> Reit status boosting the dividend Bear points: >> Uncertainty over foreign student numbers >> Strong competition for land IC View: 'Earnings growth in the next few years is likely to be significant. And while there may be doubts about the number of overseas students arriving, there is still a huge shortage of purpose-built space.' 'And yet the shares are trading at a noteworthy discount to forecast net asset value. Buy.' HTTP://www.investorschronicle.co.uk/2017/03/02/tips-and-ideas/share-tips/tips-of-the-week/unite-making-more-beds-HFw1JGvRVMXAsAfT4KfiYJ/article.html
Extremely solid full year results from Unite the highlights being: >> Final dividend up 26% to 12p (2015: 9p) making 18p for the year up 20%overall; >> EPRA Net Asset Value up 12% to 646p per share; >> Like-for-like rental growth 3.8% for the full year (2015: 3.8%); >> The statutory reported profit is £201.4 million (2015: £388.4 million), down on 2015 due to the large property revaluation gain taken into the 2015 figures; and >> Conservatively financed loan-to-value LTV of 34%. The outlook for Unite is positive as well: >> Current reservations at record levels for 17/18 academic year at 73%; >> No material impact seen or anticipated from Brexit; >> Supply/Demand imbalance continues with 185k more applicants than uni places in 16/17; >> Unite rental growth of 3-3.5% in 2017. Mr Market appears to like Unite's prospects with the share price at 629p up from 611p the night prior to the results.. Regards, Maddox
Hi rugs, I think that Mr Market may be awakening to the strategic significance of this last deal. Unite is strategically best placed to compete in the secondary market for developed student property. Welcome aboard. Maddox
Unite have made a substantial £227m acquisition of Aston Student Village comprising 3067 beds over five properties on the campus of Aston University in central Birmingham. Although it doesn't say so I presume bought from Aston University. HTTP://www.investegate.co.uk/unite-group-plc--utg-/rns/acquisition/201702100700065451W/ Reflecting this hot sector of the property market and quality of the asset the yield on purchase is 5% - but Unite intend to grow this to over 6%. I'd pick out a couple of points of significance: >> The yield of 5% is pretty good as it's as good as guaranteed as these properties are the only accommodation offered to Aston's c. 11,000 students; >> The deal reflects UTG's access to substantial funding; >> UTG's existing scale of operation and infrastructure puts it in a strategically strong position in the likely consolidation of the sector; and >> This deal will put Unite as prime candidate for similar deals by other universities looking to realize the value in their student accommodation assets. Whilst, we're foregoing the 3% development yield gain on this new approach we'll be seeing the benefit far earlier in NAV and EPRA earnings. It's also worth noting that Unite is still very conservatively financed with loan-to-value (LTV) rising to 38% from 35% previously; and with the ability to sell its developed properties into either of its two managed funds (USAF or LSAF). Unite has unique advantages to compete effectively in this attractive sector of the property market. Regards, Maddox
As well as its fully owned property Unite run a couple of student property funds of which they own a percentage. As well as earning management fees from these funds, there is also the possibility for a performance based bonus. So great news, as announced today, rental growth is continuing to drive the property fund portfolio values up – and Unite will receive a £6m bonus! The two funds are: USAF – Unite own 23% – up 4% on an annual basis LSAV – Unite own 50% -up 5% on an annual basis These funds are independently valued - and so provide an excellent indication of Unites' coming results. Regards Maddox