IC - 22 Jan 2018 SP 207.5p19 Mar 2018 10:08
This was the view from IC back in Jan. Since then with more planning approvals the case has improved further but the SP seems out of favour. IMHO I am sticking with the earlier advice given. As always DYOR but BOL. The results certainly didn�t disappoint, but the share price has since pulled back on news that chief executive Mark Watkin Jones, who has so successfully led the company, is stepping down for personal reasons. The caution is overdone.
In the 12 months to the end of September 2017, Watkin Jones� underlying pre-tax profits and EPS both rose by 13 per cent to a record �43.3m and 14p, respectively, on revenues up from �267m to �302m, reflecting the completion of 10 student accommodation developments. Cash generation was mightily impressive, driving net funds up by more than a quarter to �41m. The pipeline is impressive, too, as all 10 student accommodation developments scheduled for delivery this year have been forward sold, as have 85 per cent of the targeted beds for the 2019 financial year. Furthermore, the company�s activity in the build-to-rent market is gathering pace. Watkin Jones now has five development sites targeting 1,500 units, having completed its first scheme of 322 units in Leeds.
Reassuringly, the forward pipeline de-risks forecasts which point to EPS of 15.2p this year, and 16p in 2019, so underpinning expectations of a further 10 per cent hike in the payout per share to 7.3p and 8p, respectively. Also, as more developments complete, net funds are forecast to swell to �74m by September 2018, a sum worth 25p a share. This implies the shares are attractively rated on 12 times forward cash-adjusted earnings and offer a prospective dividend yield of 3.5 per cent. Buy.