Luxury student digs tip boosts property portfolio ninefold
OVER the past few weeks, students in their thousands have been travelling back to university or arriving on campus for the first time. The lucky few – mainly postgraduate and international students – will be settling into digs owned and managed by Empiric Student
Property.
Midas recommended the shares when they floated in June 2014 at 100p as a stock offering income and capital growth. Since then the price has increased steadily to 108½p and the group has paid out 4p in dividends, with 6p pencilled in for the year to June 2016.
With student numbers booming and increasing demand for better quality accommodation, Empiric should continue to flourish.
The company specialises in premium blocks of flats, designed specifically for students and located near university campuses.
On flotation, Empiric had just four properties. Today it has 36 up and running, housing almost 3,000 students.
A further 15 are in development, which will add another 1,800 beds by September 2017.
Unlike most student accommodation, Empiric’s flats are in small blocks for between 50 and 200 people and include facilities such as gyms, games rooms, communal study areas and even private cinemas.
In return for these upmarket extras – as well as smart, purpose-built flats and studios – students pay premium prices.
Rents range from about £130 to more than £200 per week and 70 per cent of students pay for an entire year in advance.
Rents rose by an average of 3.25 per cent this year and further increases are expected next year and beyond, given the demand for British university places from international students.
There are also plans to offer services such as laundry and cleaning, which should boost Empiric’s income. The group’s sites have risen in value over the past year and net asset value per share, a key way of measuring property companies, climbed 5.2 per cent in the year to June to 103.2p, with brokers pencilling in 112p for the year to next June. Net rental income is expected to soar from £6.1million this year to £21.3million next, as Empiric expands its portfolio and average rents rise.
Profits are also forecast to rise sharply as the company benefits from economies of scale and begins to offer new services to students. Only last week, the group announced it hoped to raise about £85million by placing new shares with large investors to fund expansion.
The company, which pays dividends quarterly, also declared a payout of 1.5p for the three months to September 30, payable in November to anyone listed on the share register by October 16.
Midas verdict: Empiric’s goal is to have 10,000 beds by 2019 and it is well on the way to achieving that ambition. Investors who bought last year should stick with the stock. New investors might also take a peek, especially given the prospective 5 per cent dividend yield.