Broker tips: Unite Group, Tesco
Analysts at Berenberg lowered their target price on Unite Group from 668p to 634p on Friday, flagging ongoing pressure from falling asset values despite solid operational performance.
Unite reiterated FY26 adjusted earnings per share guidance of 41.5p to 43.0p, with academic‑year occupancy nudging higher to 95.6% and Empiric reaching 92%. However, rent growth slowed sharply - with like‑for‑like rents rising just 0.6%, while revenue per occupied room dipped 0.3% as shorter undergraduate leases replaced longer postgraduate tenancies.
Berenberg, which has a 'buy' rating on the stock, also highlighted that fund valuations had weakened again, with USAF down 4.0% and LSAV off 3.4%.
The German bank stated disposals remained a key focus, with Unite having completed £200m of sales at a 6% discount, reducing its net debt to underlying earnings ratio to 7.3x and loan-to-value to 35%, with a further £225m under offer. However, Berenberg noted that rental growth in direct‑let business was still being dragged by lower international postgraduate demand following UK visa changes, and by shorter leases in cities such as London, Manchester and Edinburgh.
Berenberg also warned that new developments outside London have become largely uneconomic, with required rents of £12,000 to £13,000 per bed meaning that university partners were increasingly shifting discussions toward refurbishments or capital‑release options rather than new builds.
Despite the downgrade, Berenberg noted that Unite's shares imply a 7.8% cap rate and offer 9.9% EPS and 8.9% dividend per share yields, assuming successful execution of the strategy.
Deutsche Bank lifted its price target on Tesco to 550p from 525p on Friday after the supermarket chain upped the lower end of annual guidance and its share buyback programme a day earlier, as it posted a rise in interim profits.
Deutsche Bank said it continues to view Tesco as a "best-in-class" operator in UK grocery, noting that it was "particularly encouraged" by the "resilience" of earnings, despite subdued UK like-for-like sales.
"Profit growth is increasingly supported by a combination of favourable sales mix (e.g. Finest +8.9%), cost savings and ancillary income streams such as high-margin retail media," it said. "Importantly, this is not coming at the expense of competitiveness with customer satisfaction at a record high."
DB said that against a potentially weaker UK consumer, Tesco's scale advantages, strong balance sheet and value credentials leave it well positioned for outperformance.
Deutsche maintained its 'buy' rating on Tesco.