Unite Group (1K) | Buy | Upside from low expectations

研报英文原文证据摘录

Unite Group (1K) | Buy | Upside from low expectations

Unite Group Buy | Target Price: 605p

However, management is now clearly more focused on cost discipline following the impact of

weaker lettings for AY2025/26. Unite should also benefit from its technology upgrade

programme completing in 2026.

Some macro cost pressures may also be easing. The UK National Living Wage increased by 4.1%

from 1 April 2026, the smallest increase since 2021 (2.2%). On energy, where pressure may

remain higher for longer, management noted in the Q1 trading update that c. 70% of utility costs

were fully hedged through 2027. The commodity element of power and gas accounts for c. 10%

of Unite's total cost base.

Unite's 2025 adjusted EPS benefited from a GBP4.2m fee related to its redevelopment of Castle

Leazes accommodation in partnership with Newcastle University. We assume this fee was a one-

off, creating a GBP4.2m headwind for EPS in 2028 versus 2025.

Financing - assuming management's guided cost of debt

We assume Unite's average in-place cost of debt rises 80bp from 3.9% in FY2025 to 4.7% in

FY2028, in line with guidance provided at FY2025 results. Changes in UK market interest rates

could move the 4.7% cost-of-debt higher or lower, but this is a common risk across all listed

landlords rather than a Unite-specific issue. With a net debt/EBITDA ratio of 6-7x, Unite is not

especially sensitive to changes in its average in-place cost of debt.

Empiric - assuming EPS neutrality in 2028 before year-two cost synergies

The 1.6p EPS contribution from Empiric in our bridge reflects only the GBP8m of synergies

management expects to impact earnings after the first year of ownership. We assume no other

net impact from the acquisition, effectively treating Empiric as EPS-neutral by 2028, in line with