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'Your logic is fine as far as it goes, but think you can't assume they will be built as fast as they were. One of the reasons for poor quality was the rush to get them up and sold, so if 10 builders could build 10 houses in a year but now (with new checks...) they can only build 9, there will be a 10% decrease in Profits and Eps.'
I agree, Nige. I think there's two different factors and it helps to see them in isolation.
Factor 1 is the need to improve build quality. That's going to slow completions and thus be a permanent factor in earnings. Hopefully they can get better at doing quality faster, but the focus has to be on doing quality even if it is slower.
Factor 2 is the later opening of sales sites. That, in itself, should not slow building. It is a one-time hit to earnings. It should have a positive impact on customer satisfaction, but if it has any (indirect) impact on the speed of completions I'd assume it is very minor.
Yes, I think we're in for a bumpy ride, too. Makes little difference to me, I can withstand some bumps for a few years if necessary.
Hi TMT
Your logic is fine as far as it goes, but think you can't assume they will be built as fast as they were. One of the reasons for poor quality was the rush to get them up and sold, so if 10 builders could build 10 houses in a year but now (with new checks...) they can only build 9, there will be a 10% decrease in Profits and Eps.
The critical point is "whether the market believes in the transition". The Sp movement after IntRes will depend on that, but Who knows?
As a possible indicator if Relative price 04/01/19 = 100 then Cur RP 19/07/19:
bdev 134, tw 118, rdw 109, bwy 108, psn 98.
Big difference between bdev and tw is cos very good bdev PreFin (10/07/19) and tw possibly still suffering from XDivDt (06/06/19). rdw and bwy lagging cos less cash.
Average of bdev and tw is 126 less 98 means psn 28% behind bdev and tw, which Imho is a massive overreaction, but obviously the market disagrees.
Also (as I have said before) the Sp reflects the idea that there will be a building slump after Brexit, (which I don't think will happen) hence psn Per of 6.9. PreBrexit they were more than double that (justifying double the current price) so I think the market has got that wrong as well, and who is best prepared for slump anyway?
I wrote all this at lunchtime but system went down and lost it all, so doing this in Notepad and copy to Lse.
BoL and wish I had some cash reserve, cos I think it will be a bumpy ride.
Meant to add that creepy British landlord state has had c. £500,000 in taxes from me and i have taken nothing from them hence my utter disgust at palace repairs, cheating bonuses, non-investment in future, everybody on hook via £1 trillion austerity to bail out a lot of epc failure houses/estates/portfolios. Now we know the elite are crooked or just plain ignorant and looking after themselves incl royals question is how green energy investment/clean air/future tech investment is going to happen?
Well i do blame lack of intelligence for giving me a cancer which nearly killed me . But no doubt they like the rest will be going off to a cathedral and congratulating themselves how brave and honest they have been- saving the landlords!
Meant to respond to this: 'So the big question is Invest before 20/08/19 (IntRes) or not?'
It's really hard to say, isn't it? I don't think the IntRes means anything much. We're in a transition. The big question is whether or not you believe in the transition, and whether the market believes in the transition. I think if you believe in the transition that the SP is way under the real value of the company. If that's the case, trying to pick the bottom is a fool's game.
I'm holding some extra cash back for the event of a no-deal Brexit -- I expect the market to drop to stupid levels if that happens, and then I'll buy in on British companies. Might take a while or might happen quickly but they'll recover. Always buy when a panic hits, as long as you've thought through before what you want to buy.
Hi, Nige. Check my logic and tell me if I'm wrong.
Let's use specific numbers. Assume the exact same number of houses are built, and they are built at the same speed as before, and all the houses sell for the exact same price they would have sold. The only thing that changes is the timing of sales.
Now, let's say sales are 10% lower in the first half of the year because they are selling houses later. The second half of the year, those 10% of house sales that were deferred come through. But, 10% of the ones that would have sold are sold later, so they are now deferred. In the second half of the year, then, it's a wash. First half of the next year, the same applies -- you've kicked 10% of the last half's sales into this half and 10% of this half's sales into the next half, and so on.
If that's true, then a policy of delaying opening sales on a site is a one-time hit to revenue, in the period in which you make the shift. Every other period will be a wash. That hit to revenue will mostly be a hit to profit, because you still have all the expense of building the houses. But it's only one time.
It improves customer satisfaction because it decreases the chance that customers have an expectation of something that doesn't materialise. They are buying a house they can see rather than one they are dreaming about.
So I see this part of the quality push as a one-off hit to earnings, one that PSN can well afford.
Other measures may well impact earnings long term. The retention policy will push them to resolve snagging quickly, and that means not necessarily in the most cost effective manner. My view is that is a good thing -- if you've taken someone's money you should get the snagging done. But it will impact on earnings. If they spend a little more inspecting houses to make sure they don't have stupid things like leaving out fire safety features, that also might cost a little more, but that's as it should be.
So I expect the push to quality to impact profitability marginally, and that's ok. But I think taking sales sites live later is only a one-off hit.
Apologies about last line - didn't mean to send that.
Hi TMT
You seem to be saying that it will have almost no effect, but if time between start of building to exchange of contracts is increased by 5%, then T/O will decrease by 5%, so I don't think it is a one off cost. It will effect Eps in the future (by a small amount which hardly matters) but what is more important is how Big Investors will see it? Psn going in the right direction.
So the big question is Invest before 20/08/19 (IntRes) or not? My opinion is that a change of Ceo often coincides with a with a change of company fortunes. in this case from great to in line (with the others) as he sorts out the issues. Reaction by the Big Investors will determine where Sp goes, but I am not hopeful.
Don't expect psn to achieve PreFin estimates as the new culture takes over, but almost impossible to say what the Big Guys will make of it.
Incidentally my system is totally messed up by Brexit and no idea what to do now- too much money in tw and psn.
Sooner this is resolved the better.
BoL
Daftest thing is Big Guts have already discounted psn by almost 20% and don't think that will increase.
I can do short but by necessity it not pretty
History says landlords portfolios more important than progress. If portfolios threatened they don't hesitate to run off with giant generational amounts of tax payer funds to help themselves (so making progress even slower). Masons involved (should be wrapped up) and lack of intelligence bullies anybody who want to do sensible things with tax payer money. I had such slob in 2003 blowing smoke in face when justified energy investment THEN. So in short this lot not contributing. Crowm estate give nothing. Directors of builders and builder supply write themselves shameless bonuses expecting no come back. Elite no pay cuts post 2008 - surprisingly low behaviour imo.
So the short question is where does it leave the chances of progress- green energy, less polution, fair education (and not more oxbridge largely untested politicians). Pretty bad outlook i'd suggest which is why i don't want to let the bonus cheats off hook and further we find out who else has paid themselves handsomely on back of unbridled bail out. Crown estate admin also. Lack of intelligence bosses? Old poluting industrialists and car makers? etc ATB Johnson- leaving country tomorrow , essentially having been kicked out pennilesss
Politics is like sport. Some of us actually do some stuff on a limited level. All of us speculate on what the professionals are going to do and who is going to win. Some of us rant and rave about what our team, or the other team, has done. Some of us keep perspective sometimes.
My understanding is PSN is delaying opening up sales at their sites until homes are closer to delivery. That means fewer active sales sites, and fewer early sales as a result. I suspect they are going to be building close to the same number of homes and that they will have no difficulty selling them. Their last statement didn't anticipate any long term drop off.
If my understanding is correct, that would mean marginally lower sales in the one time period in which the change was made, but then in the succeeding time periods, the loss of early sales would be compensated for by higher later sales (the homes that weren't sold early will juice the level of later sales). So it's a marginal hit to earnings but only in the short term.
Hi TMT
I don't believe any deal possible now, so it's either No Deal or No Brexit regardless of what BoJo says. Expect him to say Deal impossible then 2nd Ref and if you are right we leave with No Deal, strengthening his position. Brexit party will disappear, maybe big losses for Lab/LibDems/Greens as well cos not going to change this. Boris could call a snap election and win by a landslide.
Or he could be wrong (like his 2 predecessors) and the mess we are in now will be nothing compared to what will follow.
Hope 8% decrease in active sites does not mean 8% decrease in Sales - that will impact Eps.
BoL
@johnson 'Exstatex Do you ever post short posts ?'
LOL. They look very short if you click on the filters tab and type his handle in.
@Nige. I think fundamentally the difference here is that you think Brexit would lose if another vote and I think it would win with more like 54-55% of the vote. If I thought it would lose, I probably would agree with you on all the rest. But I think it would win, and I think the politicians have polls they aren't telling us about that would show that. If they believed Brexit would lose, since a strong majority of MPs are Remainers, we'd have already had another Ref. That's my take on it. Could be wrong.
What I'd like to see is a negotiated trade deal. May's withdrawal agreement leaves me cold. It gives the UK nothing important and the EU everything they want. If you pair it with a good trade deal fair enough. But just passing it eliminates all leverage for a good trade deal. If we're going out (and I think it is inevitable), I want a trade deal, not just a divorce deal. I don't mind Brexit if we get a good trade deal. May's agreement to the EU demand to split the WA from the trade deal virtually guaranteed there wouldn't be an agreement worth the UK signing up to.
That's the way forward, for Bojo, too, if he wants to make Brexit happen. They won't change the WA? Fine. Add to it, nail down a trade deal as well, that makes the WA palatable.
Exstatex
Do you ever post short posts ?
And Directors when they paid themselves the cheating bonuses should have the SOCIAL CONSCIENCE to weigh up that what they are doing is WRONG v v where the money has come from, the misery getting it from tax payer has caused , and the vital for country projects that have been forgone. They didn't - I OBJECT. These people need psychological testing IMO in the same way that benefit cheats might and why is lack of intelligence not monitoring their every move?
What is very tiring is the realisation that tax payers are being ripped off and vital things they want to do (green energy, education, technology) with money denied them. Also the builders, landlords , crown estate having been bailed out most cynically by political system (with no strings- surprise, surprise) then have cynically refused to put their hands in their pockets and very substantially invest. This imo is beyond disgraceful/shameful and why i for one could no longer respect landlords/royals/property lawyers any more in 21C. I think we all know their answer to environmental/technical issues is to run off with as much money as possible for their own property portfolios and then try and make money from any resulting hardship on the population and increase their power in society (going off to pray in fancy buildings? and hope the people forget the parable of talents?) .This establishment had the perfect opportunity in the 21C to invest it's way out of the recession caused by bank/property rescue AND AVOID hurting the tax payer. They didn't and repaired palaces like something from Marie Antoinettes handbook. They refuse to enter 21C and will destabilise world. After 10 years silence masonic club must be called to explain its position and its view on this bailout cowardice and bonuses etc. No hiding. And lack of intelligence also explain their bullying of progress in society and ignorant taking of kings shilling.Or pander to suppliers of old tech and old energy who just happen to buy weapons (just be careful at the visa centre)
As said before answer is 50% repayment lien on assets of big landlords and crown estate so people can have the financial power to build the assets they will need for the next generation. i'd rather make a good start for them. I was not born to boost the financial power/political influence of the big landlords. BBC will probably never get to bottom of it. Again i ask have admin of crown estate paid themselves bonuses or increased wages? Why did elite volunteer no pay cuts post 2008? Why is a culture allowed permeate our country such that big landlords don't have to contribute money or effort (and are allowed cripple tax payer if they want). THIS IS WRONG. The arrogance of directors in this co. and others is also a function of this. Why do landlords think they have a right to run off with all the tax payer money and delay progress by not giving it back/been made to repay it/investing themselves after being unfairly propped up
Hi TMT
I think if a No Deal / No Brexit vote No Brexit would win. The Polls I have seen recently support this. This wouldn't matter to BoJo cos he would remain PM, as opposed to trying to force No Deal Brexit which would lead to a GE and chaos as both Cons and Lab would lose hundreds of seats to Farage, LibDems and Greens and Politics is bust.
So best solution for him is to call 2nd Ref, No Deal or No Brexit, which I hope, leads to No Brexit.
Politics is still bust, Farage will still take votes off main parties, as will LibDems and Greens cos P*ssed off with the current shambles, but at least he is still PM. Think Corbyn is out of it.
BoL
Well, we'll see. I wouldn't expect a formal alliance. I would expect 'we'll run a weak candidate in this constituency, you take it from Labour' and 'don't run a strong candidate against JRM', etc.
Of course, it's possible Tory Remainers are just bluffing. Hard to see them actually thinking Brexit is worse than Corbyn, but maybe they do.
But I also think a 2nd Ref will be Brexit again and then BoJo will be strengthened in going for a hard Brexit.
I'm not saying that's what I want to see, just what I think is likely to happen. Either no-deal or a GE followed by a hard Brexit or a 2nd Ref followed by a hard Brexit.
Hi TMT
Disagree with you about Politics - I think No Deal is less probable now causing the rise in prices. I think the eventual outcome will be 2nd Ref (No deal or No Brexit) and/or GE.
Not even BoJo would ally Cons with Farage, so Lab / LibDems / Greens would win, which BoJo will want to avoid at all costs.
Easiest way out for him is to call 2nd Ref.
I suspect no-deal is even closer today. Seems clear that Tory Remainers want to tie BoJo's hands so he has nothing to negotiate with. If he can't threaten no-deal there's no reason for the EU to move on anything, so there won't be a deal.
That means no deal unless they revoke A50. But if they try to pass something revoking Article 50 he'll call an election, agree an informal pact with Farage, and we'll get a pro-Brexit Parliament and an even harder Brexit than we would have had.
Whatever happens, I expect PSN has the cash and land bank to ride it out, and there will still be a housing shortage. Supply/demand will still mean homes sell for good prices.
Hi All
Easy to read too much into small sp movements, but all builders up (makes me think No Deal Brexit a bit further away), tw up 0.6%, bdev 0.9%, psn 1.4%, bwy 1.7% and rdw 2.2%. The companies that would be most (badly) affected by No Deal Brexit (rdw and bwy) up the most, followed by psn (being forgiven?)
BoL
Hi Johnson
All depends on your investing style. Bdev best performer, psn worst so sell psn to buy bdev. Or psn most undervalued bdev least, so sell bdev to buy psn. Not very useful.
All 3 coys are pretty similar (big Eps Growth, Margins, loads of cash, can sell all they build...) but psn a bit better than the others, with lowest Per. So they have the most potential (or value). But bad media coverage is why they have fallen so far behind. How long they take to overcome this and restore their reputation is hard to say, but Dispatches program had almost no effect on Sp.
My strategy is to hold a base value in them all and move a float between them depending on upcoming RNS's (if I think they will be good). tw IntRes 30/07/19, which I expect to be good (buy before), psn IntRes 20/08/19 - how much will new policies have impacted profits, but offset by improved service? bdev FinRes 04/09/19 good (estimated dates).
I hold all 3 as well and also bwy and rdw (even lower Per's, but less cash). The reason for lower Per's is cos market expects a slump after Brexit, and will need cash to survive the slump. In fact neither company has much debt, and I don't believe there will be a slump anyway.
If No Brexit I expect psn Per to double (from 6.9 to 13.8) and so double the Sp with the rest not far behind. If No Deal Brexit a much slower recovery as people realise there is no slump.
Tropical rain storm here right now, hope your weather is better, BoL
This week Barratt has hit a 52 week share price high of £6.35. Taylor Wimpey is still 17% off its 52 week high of £1.92 and PSN is 27% off its high of £25.... 31st of July is TW 1/2 yr results, hopefully they will be good and will send TW share price back towards 192p. I'm not quite sure what at the moment is going to send PSN back towards £25 other that the fact that it P/E is lower than the other builders. I own shares in all 3.