Member Info for Demos

Paragon came out with a decent set of results this week - no reason why OSB can't start to bridge the gap in performance over the next 12 months. £5 to £6 is realistic by end 2025.

Simon1367 ... CGT will be aligned to income tax rates, so most sellers will pay 40% rather than 24% ...

Will that apply to 'professional landlords' who I assume will have everything wrapped up within a limited company by now - and so pay corporation tax rates of 25%? This is the group that OSB target as I understand it.

Many small time (part time) landlords may well be exiting or considering doing so ... IF ... CGT rules change - but I'm not convinced it has any impact on OSB, other than sentiment.

Results better than expected. From the profit forecast in the appendix it seems underlying EPS will be about £1.36, statutory EPS £1.26 ... compared to consensus estimates of £1.17. A good result, ahead of forecasts.

Business is set to improve from here on - all my opinion of course.

I listened to the webcast and the Q&A which starts from 40 mins.

They obviously decided not to sugar coat any news in the announcement. And the significant turnaround in the dividend policy was harsher than anyone expected and it upset a lot of people. It could have been better managed in my opinion as they knew that for many investors it was a big deal.

Anyway …. the Board seemed happy that they’ve finally got the 'dividend monkey' off their back – and were looking forward to 2024 and the opportunities that they were ‘excited about’ and could plan for without worrying about the cash drain from the dividend policy. So the message is that they will use the funds for growth - good. Other positive signs for 2024 and onwards were that they were not looking to reduce teams in any significant way (they are hard to get back once they’re gone) and will be needed as business ramps up again after the slowdown that is expected this year.

Almost the first comment after 40mins (when you could feel the relief that the formal presentation bit was over) – was ‘this is the floor’ ie the worst case, and things are picking up daily. Though he did say …. but no one really knows, which of course is true.

In today's news .... new Chairman buys £500k worth of shares and Jefferies raises Beazley price target to £9.30 (from £8.25).

I thought the results yesterday were excellent. The only downside being the investment return which was already well known and should not have surprised anyone.

It's hard to find fault with what they're doing and the progress they're making.

60p a share dividend was a surprise. Looks like it was decided in view of the EPS prospects for 2023 .... 90p perhaps? So they wanted a dividend they can maintain and hopefully grow from. No point in cutting the dividend now and then having to do it again next year. Better to get all the gloom out now, which it looks like they've done. Didn't expect it. but it looks a sensible decision.

BWY should take a leaf out of RDW's book and start their own share buyback. RDW's share price has been on fire since they announced. BWY is still selling at more than 10% below book value - so a good time to start.

It would be unthinkable to accept responsibilty for the 'orphan' buildings (built by others who are overseas or who have vanished without trace) .........

HOUSING TODAY
By Joey Gardiner 31 March 2022

Negotiators working on text of “pledge” to remediate housing blocks - but funding for ‘orphan’ buildings unresolved

Housing secretary Michael Gove is on the verge of agreeing a deal with the Home Builders Federation which will see housebuilders agree to repair housing blocks affected by the fire safety crisis going back 30 years, Housing Today understands.

Two separate sources close to the negotiations said the Gove’s department and the HBF were close to agreeing the wording of a pledge, which individual housebuilders would then be expected to sign, committing builders to remediate all properties above 11m built within the last 30 years with fire safety issues.

Strictly. Maybe I’ll call you Lieutenant Columbo - all this ‘poor amateur from the boondocks’ crap - I feel like I’m entering a trap you’ve set for me. It’s all said with the greatest of respect of course, I know you’ve been analysing and investing in HBs since before I was born.

My start point is that HBs will do well in 2022. Brokers’ SP forecasts are suggesting a rise of 25 to 30%, which seems OK to me, and not stretching at all. If you accept this then it’s just about choosing which ones. I’m saying that I think the SP of CRST has a chance of out performance in 2022 – compared to other HBs. Simple as that, and nothing is guaranteed of course. And nothing fancy like ‘relative perceived value’ which is your latest concoction I believe.

So maybe I’ll add CRST to my holdings of HBs, at whatever % level is appropriate – to be decided after financial results in January.

Why? I’m not going into details here, but it’s based on forward looking data not the past. The past is secondary for me, whereas it’s obviously of prime concern to you. We’ve discussed this a million times.

No HB is top dog on all the metrics I look at – but my ranking is RDW and BWY in joint top spot, then CRST, then VTY, then TW. There’s the further unknown of how the market reacts to future events, and, not surprisingly, Mr Market doesn’t always see things the way I see them.

Demos

Strictly, you ring my bell (with some persistence) so I have to answer the door …..

Last time I looked Vistry (ex Bovis) has the best forward PE ratio of the bunch (taking an average of the next 2 years EPS projections). Everything they’ve done since the Galliford deal looks solid to me.

They also have the highest one year brokers’ share price forecast of the lot and a top 4 PEG ratio to boot.

But this means nothing if you base your investment decisions solely on what’s happened in the past I know. And it’s worked well for you so why change? And, as a result, you don’t invest in companies that have underperformed but whose prospects have changed. OK …. you would say ‘may’ have changed.

And, yes, I think that CRST is in the same situation – but not yet recognised by the market. VTY is up 24% this year, CRST only 7%.

“Who would want to have been a long term holder of Crest over the past nine years?” … an interesting comment and it carries some weight for sure, but I'm not sure if I want to let that blind me to everyting else that is happening.

Having said all that, I don’t have any VTY or CRST, but the latter are on my list for next year.

Demos

Strictly, why miss out RDW in the comparison? Are they not the best performer in this period in terms of growth in BVPS?

But probably the concerns about TW are more in terms of TSR (total shareholder return) during this period. I understand this to be growth in share price plus dividends reinvested. I think on this basis they have somewhat underperformed ....?

Demos

".... now is the right time for fresh leadership as Taylor Wimpey starts the next chapter".

Surely signalling the start of a new growth phase for the business, which I read as meaning that TW will invest excess cash in the business rather than paying out as special dividends. And a new CEO will be in a better position to handle that transition. I see it as good news .... but not everyone does, I know.

Strictly, I'm happy that I didn't disappoint you - you can read me like a book.

You mention CRST. Of the housebuilders you follow they have the best (lowest) PBV - other than INL. I know you weight CRST adversely to BWY, RDW etc. I'm just mentioning the numers as they are right now without weightings, which can change from month to month, for all to see.

CRST share price has underperformed as you mention but they were overpriced on the basis of a crazy dividend policy which has now been corrected. And the market has overreacted on the downside. Just an opinion.

Maybe TW will come out next year with a bullish statement about the future, and build on the 'more significant outlet driven growth in 2023' mentioned in the trading statement, and drop the special div. That's the best business outcome, and maybe the SP won't suffer the same as CRST did, as the SP has hardly been racing away - even worse than CRST this year. Maybe the 'seekers of dividends' have already moved on.

Demos

Interesting calculations Strictly. If you looked at the results over a more recent period - say 4 or 5 years - woud you get the same result? Can you use this data to show trends that will highlight improving / worsening performances within the house builders you follow?

TW will be interesting to watch. I've no idea of course, but I'm in the camp that says they will do their best to halt the special dividends after the nonsense of having to raise money in the middle of last year to purchase land. How will the share price react to that?

Demos

It's the Investment properties and Assets held for resale ... total of £60.6m ..... that are valued by the Directors. The rest is at lower of cost and net realisable value. Net Assets at mid year are £168m, so £60.6m is a fair chunk. Take a pessimistic view and reduce the Director valuation by 50% (not needed in my opinion but just to check) and you end up with a PBV of about 0.8 by my calcs. Which, as you'll know, is still in bargain basement territory.

Yes 'usually-right', you're right .. I can see a next year consensus EPS of 75p on sales of £1.92 bn and OM of 16.9%. The consensus now looks seriously out of date given the announcement today by RDW (sales £2bn + and OM at c 18%), and I suppose we can expect upgrades any time soon. Whichever you look at it RDW is undervalued unless you're in the 'world is going to end' camp.

Just doing the maths .... they say £2bn + in sales for next year and OM of circa 18%. That means an EPS of about 85p for ye 30/6/22. Everyone's an expert in the housing market of course - so some may disagree. But if you accept what RDW say (and for sure they know more about the housing market than me ... and are usually conservative in their statements) then this should be £8 by Xmas - a 25% gain in 6 months. 'Should be' is not 'will be' of course.

The story just keeps getting better. I make that EPS of about 68p for the year, so that's a PE ratio of just over 9. What's not to like? Probably the best amongst the house builders too. And confident enough to flag up over £2bn in sales next year with imporving margins. Can't go wrong here.

Must have been a Block Trade given that we're talking about 9% of traded shares that were exchanged, and I suppose there will be (should be) an RNS to give more detail. I think they have a couple of days grace before publishing an RNS ... maybe others know more about how this works.

Well there you go .... can't argue this time. Looks like two sales of 5 million each this afternoon. Someone agreeing with Oi Oi' s comment of 'painful isn't it', and seeing better opportunities elsewhere perhaps.