No. of Recommendations: 4
Hello Deucetoace, you're very welcome.
As a sanity check / finger in the air, last week I googled around to find a similar company in Europe to explore how it was valued currently relative to Unite Group.
https://www.xior.be/en/Xior is a Belgian student accomodation company that operates at major universities across the EU, which appears to be a comparable peer.
Xior has a comparable market capitalisation of 1.4 billion (vs 2.84 billion for Unite Group). It operates in several countries, which may be a diversification advantage over Unite which only operates in the UK, or may be a disadvantage due to language/internationalisation in IT systems, and the complexity of managing many sets of laws/building regs/uni regs/taxes/accountancy standards etc.
Xior is similarly down 50% from peak valuations a few years ago. Similar occupancy levels at 98%. Similar 'rent existing campus buildings and build where demand is high' business model.
So far, so similar.
Xior has considerably more debt, 50% LTV* rather than 24% LTV for Unite Group around the same point in time in 2025. Where Unite has a debt/EBITDA of 5.3x, Xior has a debt/EBITDA of 11.7x. This is an important difference to me as I personally prefer companies that produce good earnings using as little gearing as possible. Especially so in value plays. Excessive debt is a common factor in value traps.
Both companies have debt maturity averaging around 4 years. Xior has access to debt at 3.0% (EU) vs 4.1% (UK) currently for Unite.
For earnings and dividends, I prefer to use recorded data rather than projections. I've used today's closing prices (580p) and (29.2 euro) & 2024 full year results to calculate ratios.
Unite 2024 P/E: 44p EPRA earnings per share = 13.2x P/E (note; adjusted earnings are suggested by the company, at 46.6p/share, 12.4x P/E)
Xior 2024 P/E: 2.21 euros EPRA earnings per share = 13.2x P/E
Unite 2024 Dividend Yield: 37.3p per share = 6.4% yield.
Xior 2024 Dividend Yield: 1.768 euro/share = 6.0% yield.
Unite discount to 2024 EPRA NAV/share: 580p vs 972p = 40% discount.
Xior discount to 2024 EPRA NAV/share: 29.20 euro vs 39.91 euro = 27% discount.
Unite is projecting 3% growth in earnings/share in interims and very recent updates, and has raised the interim dividend by 3.2%.
Xior appears to be projecting 0% growth in earnings/share for FY 2025 and 0% growth in dividend according to page 36 in the 2025 H1 interim results.
In fact, earnings growth and dividend growth have been precisely 0.000% between 2023, 2024 and 2025.
Well, at least they're consistent.
Summary of important points
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1) The companies are comparable, with similar scale of operations and business model. Both companies have a 2024FY dividend around 6%, and a 2024FY EPRA P/E 13.2x.
2) Unite is achieving slightly better adjusted earnings & dividend plus better growth *while using half as much gearing as Xior* despite *higher cost of debt*. I think this is very interesting.
3) Unite is at a discount of 40% to the EPRA NAV/share, whereas Xior is at a discount of 27%. *If considering a value play rather than a long term investment, this is very interesting*.
Conclusion
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Both companies are interesting. Unite is about 6% cheaper on 2024FY dividend and adjusted earnings. Unite is about 18% cheaper by NAV discount (0.6/0.73). Unite has half the debt gearing of Xior. Unite is growing at 3% while Xior is not growing. Unite is perhaps likely to grow faster for a few years with the recent acquisition, though with elevated gearing for a while. Unite probably has better pricing power at present as it is nearing monopoly in the UK, and because UK housing demand in cities is exceptionally high.
I think on balance Unite is a much more compelling investment due to far lower debt risk, better growth, cheaper assets, cheaper earnings and dividend.
How much more compelling?
A) Assuming Unite's price recovered so that the discount to NAV was the same as Xior, would result in a 21.6% gain in the Unite share price.
B) Using EPRA earnings, and adding growth to earnings yield, 7.6% earnings yield + 3% growth = 10.6% return for Unite.
Using EPRA earnings, and adding growth to earnings yield, 7.6% earnings yield + 0% growth = 7.6% return for Xior.
Assuming Unite's price moved so that both companies had similar prospective 7.6% returns would require a 65% gain in the Unite share price (e.g. 7.6/4.6).
(Though I am not sure it would be wise to place much weight upon that argument.)
C) Assuming Unite geared up the business to the same level as Xior has, I would guess that earnings, dividend etc at Unite might improve by 10-30%. Total guess though. Haven't done the maths.
D) Overall I suggest Unite might be relatively undervalued by 20-25% versus this EU peer at today's prices. Depends on the importance you place on assets, debt cost, debt amount, near-monopoly, growth etc.
E) Or to put it another way, when Unite was priced at 720-730p 2 weeks ago, I think it was probably priced correctly *relative to this example of a peer company*.
(Xior was around the same price level then as it is today - it didn't move down in parallel with Unite's price crash).
If anyone would like to run similar comparison numbers for other EU/US university accomodation REITs, I would be very interested to see that. No AI slop though, please.
If anyone sees important/substantial flaws in the analysis above, I would be grateful if you could highlight them for me.
Otherwise, thanks for reading**.
TRS
LINKS
Full year 2024 reports and H1 2025 interim reports for each company.
https://uploads.xior.be/website/67a0ef63b53cc/xsh-...https://uploads.xior.be/website/689325fd31835/xsh-...https://www.unitegroup.com/annual-report-and-accou...https://www.unitegroup.com/articles/interim-result...NOTES
* looking at page 4 of the H1 results, their very first proud result is "LTV <50%". On page 13 the number is revealed to be 49.84%. Hmm....
** I apologise sincerely for my ongoing failure to mention Trump anywhere in this thread. Judging by the 'best of' board it seems to be some kind of requirement? :-)
