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Member Since: Wed, 6th Aug 2008

Number of Share Chat Posts (all time): 2,678
Number of Share Chat Posts (last 30 days): 8

Last Posted: Sun 15:04

Post Distribution over the last 30 days

7 Dec '17

scroll through this US data link. P/E does bounce around a lot but rarely is much below 10 for any length of time. We are now nearly 10 years of pretty consistent sub 10 P/E for the UK house building sector which is unusual. Dividend cover is now substantially higher than bank base rates which is also unusual.

Either we are about to go into another deep recession or the UK builders sector is significantly undervalued.

Don't forget London builders can make good money sustainably for the foreseeable future even in the middle of a long hard recession at substantially lower cost per sq foot so long as they don't get caught out with a big land bank bought when prices were higher. We are not Spain or Ireland who overbuilt against demand and were left with empty properties in 2010. Lots of pent up and unsatisfied demand in London that would be released at lower price points. London is near unique in the world to have a high number of persons per household/room. This is a measure of "frustrated demand" No doubt a response to price pressures and not just the fact we like living with mom an dad and friends.

Institutional rental funds derisk the land bank significantly for TEF.

found this report worth reading (when unsuccessfully looking for floorspace per person in London stats).
7 Dec '17

it is worth looking at 100 year data to realize how unusual sub 10 P/E ratios for the building sector are. Strategically quite a good time to buy even if we do get a mild recession in the next 2 years which will push the SP a bit lower than now.

For the sector and for TEF in particular my 20 year hold strategy is very solid. I've given up trying to game short term moments. Brexit has made it all too political. We could have a self induced recession due to tearing up our existing trading relationships. However unless we have a chaotic exit it will be manageable and not harm too much long term positive trends for London.

Business confidence in the competnance of our government must be at an all time low. It really is a shambles -but much of the EU is also badly managed (Italy fragile, Spain split, Germany without a government, Belgium well Belgium, far right ton the rise in Holland, Poland and Bulgaria etc drifting to authoritarianism). Far right nearly able to get the French Presidency, , and don't get me started on trump's America. SO where does an unhappy investor with international staff visas to worry about go? Russia, China, middle east?

SO competence is a relative thing. We are helped in this moment of need by the incompetence of others. By the time we have a real rival we will presumably have sorted this mess out and once again be a safe haven in an uncertain world.
7 Dec '17

the question was asked at the AGM and that was the answer. Seemed convincing.

TEF have done all the right things. If it were easy to double volume and maintain margins every 4 to 6 years there would be a crowded field of new entrants to London into our patch. There is not because it is tricky.

TEF are only now starting to exceed the pre crash SP -and even then quite hesitantly. However the base for this SP in 2017/18 is much more solid than 2007/8. EPS, volume (by Units and by value) have all roughly doubled resulting in P/E ratios halving. SO if the sector was in fashion as much as it was in 2007 we would be at double our current SP or more. Conversely if TEF had not improved i't's fundamentals as much as they did our SP would be half of what it is now.

Not TEF's fault for the changing mood Just as it is not TEF's fault for the Brexit uncertainty that is almost certainly cutting 20% + off our current SP.

However the market has not changed for TEF and TEF can achieve it's basic business plan of doubling every 4 to 6 years going forward for 15 or 20 years. It is having to skate quite clever to keep doing that in changing circumstances (no windfall HP inflation to flatter earnings and to help finance expansion). So far it has skated sector leading clever and there is no reason to believe it will stop doing so. TEF is less exposed to Brexit induced labour shortages as it has a more stable cadre of existing relatively well paid and relatively highly skilled London based construction workers. It has not been part of it's business model to rely on cheap transient labour such as might be possible in an out of town TW row homes (where skill levels can in aggregate be lower than complex infill London high rise).
5 Dec '17

Dan Roberts
As David Davis goes on today, it is clearer that he sees the answer on regulatory alignment as some sort of rebadging exercise, ie. their rules, our name: �[A] mutual recognition and alignment of standards that does not mean the same standards but one that gives similar results".

December 5, 2017

This is hopeful. I predicted they would come round to some form of equivalence to the common market with some face saving name changes. Forced by Ireland, Scotland and wales they are doing just that. Good on Ruth Davidson.

Still a big mess and May's approach to concur with everything the hard Brexiteers wanted and then be forced to backtrack bit by bit is foolish, makes her look weak, does not appear strategic and makes the nation look stupid.

I think the Tory remainers who voted May and the Tory Brexiteers who voted May expected her to persue a pretty soft Brexit. However May went full hard on them and now is having to row back as full hard was never practical -without big economic damage and no mainstream Brexiteer really that. Of course there are some dinosaurs that don't care about the economic damage so fired up they are on a complete Brexit but they are a small minority in Parliament. The cake and eat it too approach is now thrown in the bin. What replaces it is still to emerge but most likely a giant fudge.

We will be in the common market in all but name and will have some limited ability to strike free trade agreements (as EFTA does now) so long as the terms do not disrupt "EU alignment". We will have more control over EU immigration but will probably allow quite a bit of "free migration on a reciprocal basis as now. SO really just a beefed up emergency brake and the freedom to pull the plug at a later date. We probably lose passporting for our banks but who knows.
5 Dec '17

Odds going up a bit

15 to 20%

Pain , holding us down a bit, Tef going from strength to strength
30 Nov '17

nice analysis. Probably a bit conservative. A 4.5% yield for divi's in 2020 (assuming those conservative calcs are not exceeded) should push the SP higher than forecast. Also by then some Brexit certainty will be returning to the property market and there should be some HP inflation to flatter earnings.
30 Nov '17

The track we are on where we are relying on some huge new trade agreement with the USA headed by a quite unstable Trump (beyond what we already have as an EU member) to partly compensate for the loss of frictionless trade with the whole of the EU is looking more and more like a complete fantasy by mostly but not exclusively Tory Brexiteers.

Whole mess is an act of unforced error unprecedented since the Crimea -or maybe further back to the potato famine or further back to the loss of the American Colonies. According to polls 50% of the leave vote were not voting to come out of the common market so where is this electoral mandate to do so? Even at the time of the referendum 75% of those voting were not voting to come out of the common market and that was in the middle of a EU refugee crisis and Russian trolls urging us on. I doubt if there ever will be more than 25% of UK public wanting to come out of common market.

Politics tends to swing like a pendulum. Go too far in once direction and there is an inevitable swing back. Surely this will happen with regards to a hard Brexit both within theTory Parliamentary Party, within parliament as a whole, within the Brexit supporting media and within the nation.

UK can leave the EU if it wants to and it would not be catastrophic if we do but there are no quick wins and the process needs to take place in an organized way over a decade. That is how long basic trading relationships require for major change. An orderly hard Brexit could be achieved by EFTA membership for 5 to 10 years followed by a bespoke arrangement once all the ducks are lined up (or delayed if they are not).

As an investor I am in the dark. I don't like to game my investments based on fine grain personality politics as outcomes are too random.

I am positioned for a hard Brexit but not a chaotic Brexit. However as the days tick by I am getting nervous that a chaotic Brexit is really possible. Is not the Britain I know and love that a chaotic Brexit is really possible but we are where we are and the poison injected into our body politic by circulation and profit seeking private media over a 30 year period deliberately and maliciously winding people up to create a story and an audience is coming home to roost.

At least we do not have US's Fox news and the right wing shock radio jocks (without which a Trump would just not have happened) but that is small comfort when a very small number of irresponsible print media is enough to do the same damage.
29 Nov '17

Topped up a tiny bit yesterday. First top up outside my isa in a while.

It is so predictably good that it will not move the SP much in the short term.

Confirmation of the long term strategy we have all discussed though.

Bit like watching Fedora in his prime winning yet another game against a 100 seeded challenger. Almost inevitable but nice to see never--the-less.
28 Nov '17

For sure brexit has dampened the immigration of these high paid workers but London such a strong diverse economy that it can absorb it.

A slowdown for London does not translate to a good market for the regions. Maybe temporarily but not sustainably.

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