The Unite Group (UTG LN) is the UK's largest provider of student accommodation, offering both direct lets and agreements with universities. Jefferies assigns a "Buy" rating to UTG with a price target of 1,088.00p, representing a 27% upside from the current price of 855.50p. The valuation is based on a DCF model.
Key risks include potential weakness in student numbers. However, the company's strategy to align with high and mid-ranked universities is seen as positive, with a recent disposal of a portfolio of nine properties in Aberdeen, Leicester, Leeds, Nottingham, and Sheffield contributing to this strategy. The portfolio, comprising 3,656 beds, was sold for £212m (Unite's share: £140m) at a 1% discount to book value, reflecting an NOI yield of 6.4% based on 2025/26 income. The disposal is expected to complete in August 2025, with proceeds reinvested into new projects, including a partnership with Manchester MetUni.
The company's EPRA EPS guidance for the 2025 financial year remains unchanged at 47.5-48.25p. UTG's portfolio has an average age of 19 years, with nomination agreements covering 11% of beds for the 2024/25 academic year (Unite: 57%).
Jefferies' methodology for assigning ratings considers factors like market capitalization, growth/value, volatility, and expected total return over the next 12 months. The price targets are derived from various methodologies, including DCF, EBITDA, EPS, and EV/EBITDA.
The report also includes historical rating and price target changes, distribution of ratings among analysts, and other important disclosures regarding Jefferies' business relationships and conflicts of interest.
