Hello F.K. board.
I started a thread over on shrewdm which might also be of interest here.
(This is not financial advice. It is not a recommendation to buy or sell. Please do your own research and double-check every claim I make below and on shrewdm, etc, etc. Just flagging up an interesting and quite strange short-term pricing abnormality. I hold a position in this stock myself.)
Unite Group [LON:UTG] is one of the most respected/quality/boring/stable companies in the UK market. It’s a long-established student accomodation provider with REIT tax status that is tightly integrated into the UK education system, in particular, the top 10% of universities (e.g. the ‘Russell Group’, our local equivalent of ‘Ivy League’).
It is one of the oldest REITs in the UK, and predates the establishment of REITs in the UK. It has various mildly-GARPy, value and high-yield characteristics that might attract a long-term investor - low debt, steady growing earnings, very long track record of steady growth, few management mis-steps over the years, 50% discount to asset NRV at the current price, and a very high yield.
This particular falling knife suddenly dropped about 25% behind peer companies in the property sector in the UK and 25% behind a peer company providing student accomodation in Europe. Essentially no ‘news’ or scares. Earnings are on track at exactly the level projected throughout the year.
The trigger seems to be the proposed buy out of their only listed UK competitor, Empiric, which is far smaller than Unite. The vote was endorsed by management and shareholders, but a large % of institutional voters (29%) opposed it in the final vote, which has caused a short, rapid crash in the price I believe due to repositioning which began immediately after the AGM vote.
(The merits of the bid are arguable, but it seems sensible. Essentially, they are pre-purchasing 10 years of growth at a 20% discount to replacement value, rather than building it slowly and more expensively over time.)
Repositioning may now be complete. The price has already recovered about a quarter of that 25% relative gap in the last 2 trading sessions, but there is still quite a bit of potential left on the table for a quick value play or a long-term yield/growth investment.
For US investors, one interesting thing about this company is that it is essentially immune to US tariffs or other Trumpian behaviour. In fact, I believe it is very likely to benefit from the actions of the Trump administration. Uncertainties around visas and residence and politics in the USA will likely cause international students to look more closely at the second most popular international university destination. Perhaps a few wealthy American families might also feel it is a good idea to give their university-aged family members an educational break from US politics for a few years.
Anyway, the thread below discusses the background of the company, valuation relative to a close peer, and why I think this fall isn’t justified and is simply a pricing error due to a temporary excess of institutional supply vs demand. The price two weeks ago was around 730p, perhaps bottomed out at 550p earlier this week, and is now 590p with a bit of upwards momentum behind it.
The thread is linked below and I would welcome any comments or criticism of the posts by myself and others there (or post here if you prefer). Thanks for reading.
TRS
