Subject: Re: Unite Group (UTG), UK, falling knife.
Closed at 503p. What a strange day.

505p was the intraday low when it bounced in December 8th and began the steady climb back to 595p.

Since December there's been a bit of buybacks and a bit of incremental dividend built up. Interest rates have dropped. UK policy towards EU & China has improved. 2/5/10Y interest rates have fallen.

Adding it all up , UTG is far better value now than it was at the December low (which is why all the other REITs are up 15%!)

What absolutely baffles me is that there's almost nothing in these results that wasn't known last week, Feb 17th, when it was trading at 595p, or even last year. What were people 'reacting' to today? I've read the results back to front and all the trading statements and I don't see it. There's a spooky story in the Investor's Chronicle website today, but it doesn't have anything in it that couldn't have been said last week, last month, or last year.

There's a some Yahoo News narratives 'students are not going to university any more, students are staying at home with parents', but the majority of accomodation offered by Unite was sold out, 99% occupancy in most of the places they operate. This is their 'worst year since covid', yet even then, their occupancy is better than most REITs on the market in the UK and globally.

Consider CREI, another UK REIT. They've hovered around 90% occupancy for years. Their debt profile is similar to UTG. They have a much smaller discount to net assets. They have no cover on the dividend. They've flown up 15%. It makes no sense.

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The last few % of today's drop seems to be mirroring a drop in various UK REITs, particularly London-based ones.

LAND -2%
BLND -1.1%
LMP -1% (-2% from day high)
HMSO -3.3%
GBPE -2.2%
DLN -1.4%

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Various round number effect / Schelling points may now be in play.

"500p", "PTBV 0.5", "previous bounce at this level", ...

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Further thoughts:

-> big drops are more often than not followed by big rallies, this is a -13% day, very rare in the UK market on big companies outside of serious bear markets.

-> P/E is wildly out of line with the entire UK REIT sector, global REIT sector and the stockmarket in general

-> discount to net assets is now wildly out of line with the entire UK REIT sector and the stockmarket in general

-> debt profile is out of line (in a good way) with most large UK REITs. Consider, PHP, usually a peer to UTG, is running 55% LTV right now and almost no discount to NAV.

-> "P/E in 5 years < 10" rule appears to be met

-> management aren't being insane, they seem to be behaving sensibly/pragmatically

-> Empiric bid wasn't humungous, it was rather small?

-> the 'trigger' for the crash (the bid for Empiric) appears to be getting unwound by asset sales / buybacks rather quickly.

I had to remind myself today that 90% of the time, the price of a company will be lower at some point after you buy it.

Anyway it's very strange. I hope to see the price back between 550-600 in a few weeks time, as we saw after December.

TRS