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Regeneration specialist trades at a substantial discount to net asset value

Property regeneration play U and I (UAI) offers investors a 9.3% yield this financial year from ordinary and special dividends according to forecasts from Peel Hunt.

The generous shareholder returns are backed by guidance for record gains of £65m to £70m in the February 2018 financial year.

9.3% yield on offer

The company has a decent track record of meeting guidance. So it therefore seems odd that the shares are trading at nearly 40% discount to net asset value. We can only assume the depressed valuation reflects legacy issues around its cost base and the performance of its investment portfolio.

The company expects to generate a total gain of £155m to £180m over the next three years – ahead of its internal £50m per year target – from a portfolio which is focused around London, Manchester and Dublin.

The predicted gain for the financial year ending in February 2019 is somewhat lower at £45m to £50m. Finance director Marcus Shepherd claims this is purely based on existing developments.

The company specialises in public private partnership (PPP) projects where it teams up with local authorities to unlock public land for development.

U and I also books profit from trading assets in the short-term and from a portfolio of assets which includes its own completed developments and other projects with regeneration potential.

We believe the stock is a bargain at 193p. Peel Hunt has a 230p price target.

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