Barclays downgrades Unite Group, cuts price target

Barclays has downgraded Unite Group on the back of the student accommodation provider’s ongoing exposure to the Covid-19 pandemic.

The bank, which cut its rating to ‘underweight’ from ‘overweight’, also reduced its target price for the shares by 22% to 850p.

It said there were four key reasons behind the rating shift. "The drivers of the change are: assumed negative news flow in the near term; our expectation of more negative earnings per share impact in the 2021 full year than currently assumed by the market; deferred total accounting returns, which we do not think are reflected in the group’s premium rating (18% premium to full-year 2021 net asset value versus our coverage average around 14% discount); and an increase in our discount rate."

Barclays' EPS forecasts are 19% below Bloomberg consensus.

As at 0930 GMT, shares in Unite were trading 3% lower at 951.0p.

Earlier on Wednesday, the firm announced that in light of the current lockdown restrictions, it was extending its 50% rent reduction for students until early March. The move will cost the FTSE 250 £6m in lost revenue.