Top marks for Unite

High occupancy, rental growth and portfolio movements made it a great first term for Unite. Earnings growth is ahead of schedule, and with government policy increasing funded places for 2014/15, the student accommodation provider looks set to achieve great things.

Unite's half-year earnings on a European Public Real Estate Association basis were up over a third at £20.4 million, giving earnings per share (EPS) of just under 11p, up 17%. Net asset value (NAV) per share rose to 402p, more than 5% higher.

And Unite is so confident of hitting like-for-like rental growth of at least 3% for the year it's beefed up the interim dividend by 38% to 2.2p. It also reckons it will reach its 4.5% EPS yield target this year, 12 months early.

Looking further ahead, the student accommodation firm looks well-positioned for growth, especially after the government increased the number of funded places by 30,000 and has removed enrolment number restrictions entirely from 2015/2016.

And reservations are up 2% on the year at 92%, which the firm claims is supportive of its 3% target, with it pencilling in this year's transaction volumes to exceed £2 billion for the third consecutive year.

"The current low land values and commercial build costs in the regions enable high 9.5% income yields on cost to be achieved, which then re-rate to a 6.5% yield upon completion - this has and will continue to generate large NAV growth," said broker Peel Hunt. "We estimate 12% NAV growth annually for the next three years."

Unite shares are trading on 28 times forward earnings, dropping to 22 for 2015, but at a 14% discount to NAV on a two year prospective basis, according to Numis Securities. That compares with a 9% discount for the peer group, despite Unite’s superior performance.

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