On Tuesday, Deutsche Bank (ETR:DBKGn) adjusted its price target for Unite Group (LON:UTG:LN) shares, a leading provider of student accommodation in the UK, raising it to £11.70 from the previous £11.60. The firm has sustained its Buy rating on the stock.
The revision follows Unite Group's second quarter 2024 trading and fund valuation update, which revealed a robust performance with 94% of rooms already reserved for the forthcoming academic year. This figure is slightly below the previous year's 98% but remains significantly ahead of the usual leasing cycle.
Unite Group has postponed the release of rental growth guidance pricing, but the expectations for full occupancy are set between 98-99%, which suggests a potential for higher-than-anticipated rental growth, now projected to exceed 7%, up from the earlier forecast of 6% or more.
The company's fund valuations saw an approximate 3% increase in the second quarter of 2024, a rise attributed to rental growth that has been fully realized due to stable yields.
Additionally, Unite Group has achieved further successes in development planning. The updated outlook for the company is also buoyed by the new UK government's supportive stance on higher education and funding, as well as the maintenance of the graduate route for international students, who make up about 18% of Unite Group's direct let portfolio.
In light of the positive quarterly update, Deutsche Bank has increased its estimates, leading to the projection that Unite Group will deliver a sector-leading 12% three-year total annual return compound annual growth rate (TAR CAGR). The new price target of 1,170p represents a total shareholder return (TSR) of over 30%.
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