RE: Unite hitting all-time-high31 Jan 2019 12:33
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
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