MIDAS SHARE TIPS UPDATE: Student digs group Empiric lifts results

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MIDAS SHARE TIPS UPDATE: Student digs group Empiric lifts results

Two decades ago, something rather odd happened in the UK. After years of decline, the birth rate spiked upwards, rising almost 10 per cent between 200

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Two decades ago, something rather odd happened in the UK. After years of decline, the birth rate spiked upwards, rising almost 10 per cent between 2003 and 2013 before gently tailing off again.

No one really knows why this happened but it does mean that the number of young adults is materially higher today than at the beginning of this millennium – a trend that is set to continue throughout the 2020s.

Duncan Garrood, chief executive of Empiric Student Property, pays close attention to such statistics. More 18-to 25-year-olds invariably drives demand for university places and students need accommodation, ideally attractive, well-located sites where they can feel at home.

This is Empiric’s specialist area. The company focuses on top-quality digs – bright, airy and welcoming places fitted out with facilities from wi-fi to washing machines.

However, when Garrood joined Empiric in 2020, the group had lost its way. Occupancy rates were down and the shares were trading at a material discount to listed peer Unite.

Rewarding: Empiric stock has risen to 86p but remains undervalued

Rewarding: Empiric stock has risen to 86p but remains undervalued

Garrood was tasked with fixing Empiric’s problems. Armed with 40 years of commercial experience, he took up the challenge.

Much of Garrood’s career has been spent in the food and hospitality business, including a stint at the helm of pub chain Punch Taverns, before it was sold for £1.8 billion in 2017.

Empiric chairman Mark Pain was a director at Punch during Garrood’s stewardship, saw what he could do and thought he might be able to repeat the performance at the troubled student digs group.

Progress to date has been encouraging. Today, Empiric’s 80-plus properties are 99 per cent full, students are happy and financial results are much improved. But there is more to come and the shares, now 86p, should respond.

High-grade student accommodation is in short supply, especially in and around Russell Group universities. Tatty digs may still be available but today’s undergraduates prefer to spend their time in more salubrious surroundings.

Post-graduates are even pickier, considering themselves more akin to young professionals than grungy teenagers. Garrood recognised this from the off, selling sites in secondary locations, while acquiring, converting and upgrading properties in cities, such as Bristol, Manchester and Glasgow.

Garrood has also increased Empiric’s share of the international student market and this should serve him well, with forecasts suggesting numbers will rise consistently over the next few years.

Formerly a PhD student at Imperial College, London, Garrood is actively looking for acquisitions in the postgraduate space, and may enter into joint ventures with big investment institutions to help finance such growth.

Brokers expect a 24 per cent uplift in 2023 profits to £26 million, with further strong growth next year and the year after.

There has been a renewed focus on the dividend as well, forecast to rise 25 per cent to 3.5p this year, hitting 4.8p by 2025.

Midas verdict: Midas recommended Empiric in 2014, when the shares floated on the stock market at £1. Early years were promising but the company then fell out of favour and the price slumped to 58p before Garrood came on board. The stock has since risen to 86p but remains undervalued. Existing shareholders should sit tight. Newcomers may also find the stock rewarding.

Traded on: Main market Ticker: ESP Contact: empiric.co.uk or 020 8078 8791

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