Not a lot wrong with the IC report-as it says on the tin .The particular appeal for me is that Wicks has gone hell for leather to have taken advantage of the improved market and driving these land deals through the planning process. This is no easy job of course with a lot of stagnation due to the upcoming election.You can almost feel his impatience as with the listed pub scenario. He has past form in selling out companies before the downturn.I expect some news of immediate sales of oven ready sites.He has almost hoisted a For Sale sign up on the company
The shares are reasonably priced on an earnings-based valuation too: the company’s current market capitalisation of £134m equates to 12 times its fiscal 2016 post-tax profit estimates.
I would also point out that although Inland’s agreement with Christian Candy's CPC Group - to jointly fund the acquisition of brownfield sites with the potential for residential or mixed-use development across the South-East of England – has promise, it has no implications on the above profit and net asset value estimates as the planning process has only just started on the joint venture’s first project in High Wycombe. I would also point out that the press comment earlier this week in our sister publication The Financial Times, referred to Candy & Candy Holdings, one of Nick and Christian Candy’s companies, and not CPC Group, Inland’s joint venture partner.
So after taking into full consideration the possibility of Inland realising substantial value for shareholders from future land sales, and increasing profits from house building in what remains a benign environment, I feel the shares are well worth holding onto at the current price. True, the forthcoming election increases uncertainty short-term, but I would still run your bumper profits with a view of achieving my upgraded year-end target price of around 80p.
That’s the main reason why analysts at W.H. Ireland calculate the company has a sum-on-the-parts valuation of 100p a share.
Developments with bumper profit potential
For instance, consider the value in Inland’s flagship development project at the former MoD site at Wilton Park in Beaconsfield, Buckinghamshire. This site was acquired for £35m last year including deferred consideration of £29m to be paid over the next three years. A planning application is being submitted for a development of 350 homes, and should be approved after the Development Brief was adopted by the South Bucks District Council at the end of March. This is prime real estate with houses in the area amongst the priciest in the UK outside London. Indeed, based on a gross development value of £300m, the average price per unit is around £860,000 per home, so there should be bumper profits to me made. Using a 25 per cent gross margin and an 80 per cent profit share implies a post-tax profit of around £47m for Inland, or the equivalent of 23p per Inland share.
Excluding Wilton Park and other joint ventures, analysts estimate that the open market value for the company’s 1,656 plots of owned land is in excess of £80,000 a plot, or more than double the implied carrying value in the company’s latest accounts. The difference between book value and open market value on these land holdings alone is around £70m, a sum worth 35p per Inland share. It’s not difficult to make a case that once you mark all the company’s land holdings to market value, including the value tied up in land under option, then Inland’s true net asset value per share could be easily be treble the 33.3p figure in the latest accounts.
Potential bid target
It’s not beyond the realms of possibility either that the UK’s largest homebuilders may be tempted to swoop on Inland as an easy way of getting their hands on a valuable land bank located in prosperous southern England. It’s highly unlikely that I am the only one doing the above calculations. And with Inalnd’s top six shareholders owning 34.6 per cent of the issued share capital, including founder Stephen Wicks who has an 8 per cent shareholding, then surely any take-out price would have to be close to the 100p sum-of-the-parts valuation. Importantly, the company is well funded: net debt of £28.8m, including zero dividend preference shares of £12m, represents 42 per cent of shareholders funds.
Admittedly, I am not banking on a takeover at this stage, but I still feel that the hidden value inherent in Inland’s land bank is yet to be properly reflected in its market capitalisation even after applying a small cap liquidity discount. In fact, applying a 20 per cent discount to sum-of-the-parts valuations implies a share price closer to 80p, or almost 25 per cent above the current level. The shares are reasonably priced on an earnings-based v
Hello Lacey; gosh, long time no hear on the boards from you. Welcome aboard. I had this one on my radar for a long time, and took the plunge after the last set of results. Although this is my newest holding, it is also one of my oldest in that I bought into it years ago at around 45p then sold out at around 39p when it was on its way down and down.
Kyusho - thanks for the post. Good to read I.C are still positive about INL.
It’s decision time for one of my most profitable recommendations in the past couple of years, Aim-traded housebuilder and land developer Inland Homes (INL:64.5p). Having reiterated my long-term buy advice several times since initiating coverage in my 2013 Bargain share portfolio, the shares duly hit a record high and my 70p target price at the end of March post the company’s fiscal 2014 results.
That represents a 200 per cent gain on my recommended buy-in price of 23p in February 2013. I also published a bullish update ahead of the financial results when the share price was 57.5p ('A fluid performance', 2 February 2015), and subsequently re-iterated that advice in early March when the price was around 65p (‘Housebuilders: Trading bumper gains’, 9 March 2015).
Do the maths
The question I have to ask myself now is whether there is enough share price upside left to warrant maintaining a financial interest. Analyst Nick Spoliar at broking house W.H. Ireland certainly thinks so as he has a target price of 80p and a sum-of-the-parts valuation of 100p a share. Analyst Duncan Hall at brokerage finnCap has a 70p target price and a hold recommendation on the shares. Based on Mr Hall’s estimates Inland is on course to more than double revenues to £89m in the financial year to end June 2015 and lift pre-tax profits by 40 per cent from £8.6m to £12m. On this basis, expect EPS to jump by almost 75 per cent to 4.7p, helped by a lower tax charge, to underpin a 50 per cent rise in the dividend to 0.9p a share.
Those forecasts look solid as Inland has just reported a 68 per cent increase in pre-tax profits to £6.1m in the six months to end December 2014, or half the forecast full-year outcome. This performance was buoyed by a quadrupling in new build sales to just shy of 200 units in the company’s housebuilding business. Moreover, with 199 completions already booked in the fiscal year, Inland looks likely to beat Mr Hall’s full-year forecast of 270 units.
The one fly in the ointment is the uncertainty on the timing of land sales caused by the forthcoming general election. That’s because even if Inland hits finnCap’s revenue estimate of £63m (based on 270 completions), then the company still needs to make some substantial land sales to achieve the £89m full-year revenue estimate. No realisations were made in the first half, and though there should be some material sales in the current quarter, predicting the exact timing is difficult.
Still, that should not detract from the long-term investment case. Buoyed by a record land bank of over 4,500 plots, and with all the political parties recognising that the UK has a serious housing shortage, Inland is undoubtedly well placed to continue to realise the hidden value from its land holdings while at the same time ramping up its housebuilding operation. That’s the main reason why analysts at W.H. Ireland calculate th
Big step forward for the Wilton Park site in Beaconsfield, which will deliver up to 350 new homes set within landscaped parkland of over 100 acresthe Wilton Park site in Beaconsfield, which will deliver up to 350 new homes set within landscaped parkland of over 100 acres. Just take the time out to look at the 2 year share graph.
Excellent they got there sooner than I thought All we need now is Jimbo to give them a ringing endorsement for a SP boost .Good news on Beaconsfieldthis morning . Now just the sticky thru Planning to wade through to get the gold !
Datafeed and UK data supplied by NBTrader and Digital Look.
While London South East do their best to maintain the high quality of the information displayed on this site,
we cannot be held responsible for any loss due to incorrect information found here. All information is provided free of charge, 'as-is', and you use it at your own risk.
The contents of all 'Chat' messages should not be construed as advice and represent the opinions of the authors, not those of London South East Limited, or its affiliates.
London South East does not authorise or approve this content, and reserves the right to remove items at its discretion.