MIDAS SHARE TIPS UPDATE: Expect more first-class returns from student digs as Unite Group shares soar 39%

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In the current academic year, 512,000 students started degree courses in the UK, the highest number ever. This year up to 600,000 new starters are expected, after the Government lifted the cap on the number of students universities can accept.

Growth in university places is not just good news for aspiring young people – it is also highly beneficial for student accommodation specialist Unite Group. The company was recommended by Midas in September 2013 when the shares were 368p. Today, they are up 39 per cent at 512p and should continue to do well.

Demand: Unite will ade 4,000 more rooms to its portfolio by the end of 2016.

Back in 2013, concerns still lingered about the impact of university fees on student numbers. The evidence since then suggests enthusiasm for higher education is stronger than ever.

Universities are obliged to provide accommodation for all first-year and overseas students, but they only have space for about half of them. The rest are either placed in private rented accommodation or in purpose-built blocks such as those provided by Unite.

The company has about 44,000 rooms today. It will add another 1,000 in September and a further

3,000 in 2016. About 8,000 rooms are in London, where rents average £8,000 per academic year. The rest are in 22 cities around the country, where rents are about £5,000.

Increasing room numbers boosts profits not just because rental income goes up but also because there are economies of scale in areas such as cleaning, maintenance and supplies.

Unite gains further revenues by letting out rooms over the summer months, when students are on holiday. Demand for university accommodation is strong, but Unite chief executive Mark Allan is keen to provide living space that is significantly better than the traditional dilapidated house, packed to the gills with messy students. Unite accommodation blocks are clean, purpose-built and include high-speed internet access, ensuite bathrooms and front desks manned day and night.

Following criticism about value for money, Allan has also invested £40million upgrading the portfolio, adding more study areas and common space and offering fortnightly kitchen cleaning as part of the rental package.

Unite reports 2014 figures on February 23 and the results should be good. Earnings per share - underlying profits divided by number of shares – are forecast to rise from 14.8p to almost 17p, while the dividend is expected to more than double from 4.8p to at least 10p. Over the next three years, earnings per share are expected to double to about 34p, with dividends growing strongly too.

Midas verdict: Shareholders have done well out of Unite and should continue to do so. New investors looking for solid long-term homes for their cash could also put money into this business.

Traded on: Main market Ticker: UTG Contact: 0117 302 7000 or unite-group.co.uk