UBS has initiated research coverage on Unite Group Plc with a "buy" rating and a 12-month price target of 585p, saying the UK’s largest purpose-built student accommodation (PBSA) owner is being undervalued because markets are treating short-term demand weakness as a lasting structural trend.
Shares were trading at 511p as of May 28, which corresponds to roughly 15% upside to UBS’s target. Over the past year the stock has ranged between 449p and 862p, and UBS noted Unite was the weakest performer across its extended UK real estate coverage over the previous 12 months.
UBS highlights a material valuation gap versus peers. Unite is trading at about a 50% discount to net tangible assets (NTA), compared with a 20%-25% discount for other UK-listed peers. The broker also noted Unite’s multiples and yield characteristics, citing roughly 12 times earnings and an implied portfolio yield of 7.6%.
In UBS’s view, the market has been extrapolating near-term softness in bookings - in part due to lower flows of international postgraduates - into the indefinite future. The analysts said this perspective overlooks important nuances and therefore creates an attractive entry point should fundamentals begin to normalise in subsequent booking years.
UBS’s Economic Value Add framework produced a t+1 NTA forecast of 925p per share. From that base, the net present value of future value creation, discounted at Unite’s cost of capital of 9.49%, amounted to negative 339p. That calculation leads to a fair value of 586p, which UBS rounded to a 585p price target.
When adding a forecast dividend of 32p, UBS projects total shareholder return of 20.9% over the 12-month horizon implied by its target.
On operating forecasts, UBS expects underlying earnings per share (EPS) of 41.75p in fiscal 2026, marginally below consensus of 41.9p. By fiscal 2028 the broker models EPS rising to 43.36p, about 3.3% ahead of consensus of 43.12p. Net rental income is projected at a333 million for 2026 and a3343 million for 2028, per UBS’s forecasts.
UBS pointed to recent trends in student demand, noting undergraduate applications rose 2.3% in 2026, with applications to high-tariff universities accelerating to 5.9%. The broker also highlighted the composition of the combined Unite and Empiric portfolio following Unite’s January 2026 acquisition of Empiric Student Properties, estimating roughly 75%-80% of beds are aligned to high-tariff institutions and about 70% of beds lie within 2 kilometres of such universities.
The brokerage identified fiscal 2026/27 as the likely earnings trough, modelling 2% rental growth and 93% occupancy - described as the lower end of company guidance - before projecting a medium-term recovery to like-for-like rental income growth of 3%-4%.
Turning to supply-side dynamics, UBS expects net new PBSA completions to trend toward zero by 2028. The firm points to a roughly 50% increase in construction costs since pre-Ukraine war levels as a key drag on new supply.
UBS also provided downside and upside valuation scenarios. The downside case yields a price of 323p, implying a 37% decline from current levels, while the upside case produces a 921p valuation, an 80% gain, giving a 2.2-to-1 upside-to-downside ratio under the scenarios modelled.
As part of its risk and return assumptions, UBS assigned Unite a beta of 1.5 and calculated a cost of equity of 11.50%, using a 4% risk-free rate and a 5% equity risk premium.
Contextual note - UBS’s initiation combines valuation modelling, supply-demand analysis and transaction-adjusted portfolio alignment following the Empiric acquisition to argue for a re-rating should booking cycles normalise. The broker’s forecasts and scenario analysis outline how earnings, rental income and NTA are expected to evolve under its central case and stress scenarios.