23 February 2022
If you are covering Unite’s results, please see the following comment from Oli Creasey, head of property research at Quilter Cheviot:
“Unite Group’s full year announcement this morning highlights the company’s ongoing return to normality, following considerable disruption from the Covid pandemic. Key metrics have improved considerably, notably the occupancy rate, which at 94% is still a few points off pre-pandemic levels (c.97%), but well ahead of the rest of the student accommodation market (83%). Unite’s pace of recovery can be attributed to two things: the company’s commitment to providing a quality and covid-safe experience to students, and associating with the best universities in the UK, as grade inflation has led to better institutions being oversubscribed while attendance has dropped elsewhere.
“The UK has now announced the end of all Covid restrictions, and our assumption is that in-person university attendance will return to normal as well. Unite management agree, guiding to effectively full occupancy (97%) , and for rental growth to be between 3-3.5% (vs 2.3% in 2021). The company are also guiding to a total accounting return (NAV growth + dividends) of c. 10% in 2022, having achieved similar returns in 2021.
“Our view is that students will be looking to make up for lost time as much as anyone else over the coming year, and we expect demand for Unite’s accommodation to increase further. Fewer travel restrictions will also encourage more international students to return, which will add to this demand as well.
“It is notable that despite the company and the sector being well-placed, Unite’s shares are close to their 12 month low as per yesterday’s close, and are almost as cheap as they have been since the announcement of Covid vaccinations in November 2020. That feels difficult to justify, with guidance suggesting the company is back to pre-pandemic performance.”
