MIDAS UPDATE: Second fundraising for luxury student flats operator Empiric
An uncomfortable number of companies have had to pull out of flotations in recent months because large investors were unimpressed with what they had to offer.
But one firm that has managed to come to market is Empiric Student Property, which specialises in high-end accommodation, primarily for overseas students.
Midas looked at Empiric in June, a fortnight before it floated. At the time, the company said it wanted to raise between £110million and £150million at 100p a share. Ultimately, it raised £85million.
Class act: Empiric wants £65million from investors to create top-end student flats
Today, the stock is 102p and Empiric is now asking for just over £65million more cash – essentially the money it wanted back in June, but this time at 101p a share.
Empiric is ambitious. The company is targeting a 6 per cent dividend yield and 7 per cent capital growth annually, achieved from a combination of rental income and an increase in the value of its properties.
The early signs are promising. Having come to market on June 30, the group has said it will pay a 2p dividend for the five months to December and a significant increase is likely for 2015.
The company already has eight accommodation buildings, which are more than 99 per cent let for the next academic year, and most of the £85million has been invested or committed.
Chief executive Paul Hadaway wants more money because he is in advanced negotiations to buy 15 more properties valued at about £180million.
The company will need to return to the stock market if all these negotiations prove successful and Hadaway has said that he would like to have 300 million shares in issue within a couple of years – more than double the number that will be in issue if this latest fundraising is successful.
In some sectors, such a programme would sound scary. For Empiric, it makes sense. Student accommodation is in short supply and Empiric is focusing on upmarket units in top university towns, where rents are rising above inflation.
Midas verdict: Empiric is operating in a growth market, Hadaway is an experienced operator and the company should deliver a decent mixture of income and share price appreciation. The current fundraising is worth a close look, particularly for longterm investors.
Traded on: Main market Ticker: ESP
Contact: espreit.co.uk or 020 3772 2780
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