Member Info for Josh95

I am very tempted to buy a few Bdev at current levels. Results for the year to June are out in Sept and forecasts estimate the current book value is currently 385p. Bdev is thus trading on a discount to NAV on a p/b multiple of just 0.91x! To put this into perspective, TW. trades at 1.4x NAV and PSN 1.7x. The only other builder trading at a discount is Bovis at 0.9x. To me Bdev looks too cheap at these levels, and even with such uncertainty at the moment, is surely an excellent medium term buy at these levels with limited downside unless property prices really do start to fall which is currently hard to see with such strong mortgage availability.

I also work across the sector and many of the listed companies within it. Just like you say Mac, the clients I work for are seeing no slow down in reservations just as reiterated in PSN's trading update today. As we expected, they also stated although reservations have remained strong since brexit, it is too early to tell the medium term effects that may materialize but the statement that they remain confident that they can deliver the remaining 900p of their capital return plan over up until 2021 is a very confident statement. This confidence has also been backed up by the recent share purchases to hold as treasury stock. Sell off is thus currently based on fear over circumstances that may well never materialize, time will ofcourse tell but I am confident if you bought in here today and held until 2021 you would likely enjoy a very nice total share holder return which is what we can take from the trading update and recent share purchases.

The trading update will not set out detailed plans moving forward! But it will detail current trading conditions so far post brexit (as well as those to half year) and thus the sector share prices will react to this information- a key piece of information that will move the sector tomorrow.

Here tomorrow. I'm sure the entire sector and supply chain will be watching! Can't see much of a slowdown as the moment from where I am, think it will take a few more months to see what the real effects are likely to be so expecting a positive update here tomorrow. I await with great interest.

Evening Asbury, Congrats on the performance of your portfolio, RDSA and Bp. were indeed excellent defensive stocks to hold in the event of brexit. Like the financial markets, bookies and most politicians (including Farage himself) I didn't expect brexit either but the risk was such that I felt the need to take substantial levels of cash out of the market; I was not completely out of the market on the 23rd/24th but I was very well positioned for either outcome IMO and took on board a sensible degree of risk with short positions on BKG and a holding in Randgold resources mitigating losses from TEF, INL and Crest which were my only other holdings at the time (bought in at low prices so losses weren't so bad). I sold the latter on brexit itself expecting further falls and as such my portfolio is now only down c.5% from its height overall. I'm pretty happy with that tbh as the result could have easily gone the other way so it was right to have some exposure to both outcomes and be positioned sensibly IMO to reflect the risks- you have done very well. I still remain 90% in cash. I was lucky enough to catch TW. at the bottom and picked up a few at 114p and some days later crest at around 330p. Apart from that and Randgold I remain out of the market. There is so much uncertainty it is difficult to value the sector but equally I see these levels as a good long term investment even if we do drop further and indeed see a shallow recession. Bdev and Bovis are trading pretty much at 1x book value at the moment so it is hard to justify any more down side from todays close for long- I may well buy a few if they do move down further. All eyes over to PSN trading update tomorrow. I sometimes audit companies within the sector and at the moment I am seeing limited slow down in reservations and only some cancellations coming through into the financials of sector stocks. I expect PSN will release a positive update to that effect tomorrow and the sector may well be in for a bounce.. But who knows, could easily go the other way if they mention something the market doesn't like! I eagerly await their update.. got a feeling it will be up beat. PSN have been buying shares back and holding them for shares paid out as bonuses which would suggest that they think their stock price will be on the up from here..

Forward PE does suggest Crest are cheapest in sector, but uncertainty over whether they can deliver the EPS forecasts exists so hard to value on this basis alone. Forward book value for Oct 2016 is 287p putting crest on 1.25x forward book value for Oct 2016. I'm back in Crest now at 330p, only bought 2000 shares back today though still 90% in cash. Will continue to monitor macroeconomic conditions. Thanks for the charting analysis.

Post-Brexit gloom about UK residential property has taken hold, with investors pricing in a 5 per cent fall in home values over the coming year. Housebuilders have been among the stocks worst hit by the sell-off since Thursday’s vote to leave the EU. The decline has been fuelled by fears that uncertainty will prompt consumers to delay homebuying decisions, weighing on house prices, while longer-term economic weakness could also set in. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the collapse in housebuilders’ shares — before a slight recovery on Tuesday — was “consistent with a 5 per cent fall” in the prices of homes over the coming year. He added, however: “I think they will fall, but 5 per cent may be overdoing it. The market overreacted in the initial panic. Prices may fall 2 to 3 per cent over the next 12 months.” Shares in the UK’s four-largest housebuilders have fallen between 28 and 37 per cent since the referendum, as investors once enamoured with the sector have fled en masse. The companies’ shares had risen steadily over the past three years, boosted by a housing shortage, strong demand, cheap credit and government-backed homebuying schemes. On Monday, trading was briefly suspended in Barratt Developments, Crest Nicholson, Taylor Wimpey and Berkeley Group after each of them dropped sharply enough to trigger a FTSE 100 “circuit breaker” mechanism. The market found some relief on Tuesday with a trading update from Redrow, a FTSE 250 builder, which said its results were set to come in at the top end of expectations for the year to June. “Although it is too early to tell whether Brexit will have any effect on future sales, initial feedback is that sites remain busy, reservations continue to be taken and, indeed, we witnessed long queues and strong reservations at new sites launched last weekend,” Redrow said. The Flintshire-based company said it had experienced no slowdown in the run-up to the Brexit vote, but Berkeley — known for its high-end London developments — said earlier this month that its reservations dropped 20 per cent in the first five months of 2016 from a year earlier. In depth - Brexit The housing market in London had already begun to stall before the vote, after stamp duty on expensive homes was increased and demand from overseas buyers began to wane. This prompted short-sellers to target shares in developers such as Berkeley from the start of the year. “The London market was starting to slow anyway. A lot of the cards are stacking up against London, before we overlay the uncertainty of Brexit,” said Richard Donnell, research director at Hometrack. Crest Nicholson, another FTSE 250 housebuilder, said ahead of the vote that it would halt land investments and recruitment for three to six months while taking stock of the market if the UK voted to leave the EU.

Market observers now expect that the post-Brexit uncertainty will cause an initial chill in the housing market as consumers defer decisions. But the longer-term impact will depend on the economic fallout, potential interest rate rises, and to what extent London can retain its status as a global financial centre. Analysts at Bank of America Merrill Lynch expect a 10 per cent drop in transaction volumes combined with a 10 per cent house price correction over the coming year — among the more pessimistic forecasts. Charlie Campbell, analyst at Liberum, said real house prices had fallen 3-3.5 per cent in 2012 and 1996, both years of economic downturn. Housebuilders with strong levels of forward sales, such as Bellway, Redrow and Berkeley, are better positioned to weather short-term uncertainty, he added. Investors had piled into housebuilders in recent years — more than doubling valuations between 2011 and early 2015 — as they strengthened their margins and many groups, such as Berkeley and Persimmon, announced multiyear programmes of dividend payments to shareholders. Mr Campbell said these would likely still go ahead: “Housebuilders’ balance sheets are much stronger and in a much better position to withstand shocks than in 2008 and 2009. With a bit of luck, I think the dividends will get paid.” He noted, however, that the market must still contend with extreme levels of uncertainty, as the UK faces a political vacuum as well as a changed future in Europe. “There are a lot of unknowables, and political jitters make quite a difference. You wouldn’t normally get people rushing in to buy housebuilders with no government in place,” he said.

Market observers now expect that the post-Brexit uncertainty will cause an initial chill in the housing market as consumers defer decisions. But the longer-term impact will depend on the economic fallout, potential interest rate rises, and to what extent London can retain its status as a global financial centre. Analysts at Bank of America Merrill Lynch expect a 10 per cent drop in transaction volumes combined with a 10 per cent house price correction over the coming year — among the more pessimistic forecasts. Charlie Campbell, analyst at Liberum, said real house prices had fallen 3-3.5 per cent in 2012 and 1996, both years of economic downturn. Housebuilders with strong levels of forward sales, such as Bellway, Redrow and Berkeley, are better positioned to weather short-term uncertainty, he added. Investors had piled into housebuilders in recent years — more than doubling valuations between 2011 and early 2015 — as they strengthened their margins and many groups, such as Berkeley and Persimmon, announced multiyear programmes of dividend payments to shareholders. Mr Campbell said these would likely still go ahead: “Housebuilders’ balance sheets are much stronger and in a much better position to withstand shocks than in 2008 and 2009. With a bit of luck, I think the dividends will get paid.” He noted, however, that the market must still contend with extreme levels of uncertainty, as the UK faces a political vacuum as well as a changed future in Europe. “There are a lot of unknowables, and political jitters make quite a difference. You wouldn’t normally get people rushing in to buy housebuilders with no government in place,” he said.

Post-Brexit gloom about UK residential property has taken hold, with investors pricing in a 5 per cent fall in home values over the coming year. Housebuilders have been among the stocks worst hit by the sell-off since Thursday’s vote to leave the EU. The decline has been fuelled by fears that uncertainty will prompt consumers to delay homebuying decisions, weighing on house prices, while longer-term economic weakness could also set in. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the collapse in housebuilders’ shares — before a slight recovery on Tuesday — was “consistent with a 5 per cent fall” in the prices of homes over the coming year. He added, however: “I think they will fall, but 5 per cent may be overdoing it. The market overreacted in the initial panic. Prices may fall 2 to 3 per cent over the next 12 months.” Shares in the UK’s four-largest housebuilders have fallen between 28 and 37 per cent since the referendum, as investors once enamoured with the sector have fled en masse. The companies’ shares had risen steadily over the past three years, boosted by a housing shortage, strong demand, cheap credit and government-backed homebuying schemes. On Monday, trading was briefly suspended in Barratt Developments, Crest Nicholson, Taylor Wimpey and Berkeley Group after each of them dropped sharply enough to trigger a FTSE 100 “circuit breaker” mechanism. The market found some relief on Tuesday with a trading update from Redrow, a FTSE 250 builder, which said its results were set to come in at the top end of expectations for the year to June. “Although it is too early to tell whether Brexit will have any effect on future sales, initial feedback is that sites remain busy, reservations continue to be taken and, indeed, we witnessed long queues and strong reservations at new sites launched last weekend,” Redrow said. The Flintshire-based company said it had experienced no slowdown in the run-up to the Brexit vote, but Berkeley — known for its high-end London developments — said earlier this month that its reservations dropped 20 per cent in the first five months of 2016 from a year earlier. In depth - Brexit The housing market in London had already begun to stall before the vote, after stamp duty on expensive homes was increased and demand from overseas buyers began to wane. This prompted short-sellers to target shares in developers such as Berkeley from the start of the year. “The London market was starting to slow anyway. A lot of the cards are stacking up against London, before we overlay the uncertainty of Brexit,” said Richard Donnell, research director at Hometrack. Crest Nicholson, another FTSE 250 housebuilder, said ahead of the vote that it would halt land investments and recruitment for three to six months while taking stock of the market if the UK voted to leave the EU.

Another good article, http://www.ft.com/cms/s/0/f460987c-3d43-11e6-8716-a4a71e8140b0.html#axzz4ChIcWp9B Post-poll sell-off signals 5% house price fall

Hi Bazz, ahh yes sorry i misunderstood you. Crest did indeed mention they would freeze recruitment and halt land investment for 6 months but this is really to gauge the direction of the market more than anything and prevent pushing up costs and cash outlay in times of such uncertainty. The size of Crests current landbank allows them to do this without too much impact on the current future plans anyway. Worth a read: http://www.wsj.com/articles/brexit-aftermath-time-to-back-rebound-in-u-k-home-builders-1467181084

I think house builders are now over sold since brexit has materialised. Although I have seen a low number of cancellations across some of the businesses I audi signs remain positive as confirmed for example in Redrow's recent trading update. Although a recession could be on the cards, this is likely to be shallow and nothing like the nature of 2008 if indeed it even occurs- we may reach some kind of trade deal with the EU that limits any slowing of growth sooner than many think. Even assuming the worst though, the financial sytem is not seizing up like it was in 2008- mortgage availability remains strong and the BOE are likely to cut rates further which will continue to stimulate demand, I don't think house prices will fall too much, and many resorts from the big 4 indicate volumes are more likely to suffer than prices. At the end of the day, even if we do have a shallow recession a structural imbalance of UK homes still exists and ultimately longer term this will undoubtably get back to levels nearer £6 which we were at only pre brexit! Bazz- I've not read any reports of Crst looking to stop building post brexit and it makes no sense anyway, they won't do that but will perhaps delay investment in major projects until the uncertainty passes which we are already seeing, not only in this industry but across others too. Crst has fallen the most since brexit, crashing 41% from its pre brexit price. In these circumstances it is hard to value on forward earnings as we do not know how likely the EPS forecasts past the length the order book stretches are likely to materialize given market uncertainty. In times of panic P/B sometimes becomes more appropriate. Current price/book for the sector: TEF 1.07 RDW 1.09 (June 16 forecast) CRST 1.37 BVS 0.95 BWY 1.2 TW. 1.35 GFRD 1.3 PSN 1.67 BDEV 1 As we can see book values range from just under 1 to 1.67x. Crest looks the cheapest builder on an earnings basis but mid range on balance sheet strength. Seems like the market is making a trade off between book value and the current probability of forward earnings. For me I am currently 95% in cash, but I do believe now is the time to start building up positions again. I plan to drip feed back into the market and will re-enter with small positions. I think it is better to have some cash in the market now given the potential upside and long term outlook for the sector but I will not be going anywhere near my previous levels of investment until I see some more stability. If prices drop 10% I will increase my positions. Still plan to keep at least 50% in cash though until we know the direction of the economy and sector reservations, volumes and prices. SO many bargains in the sector right now- Bdev was trading at below book value for a while as was Bovis, but these are now very close again to book value. At present is very hard to justify builders trading below book value so downside at these levels looks limited and stocks are priced

Strongest rise in the sector today- a taste of what is to come next week if we remain in the EU!

Indeed, great news today RE: land sales. Muted response due to the looming referendum though; will surge again with a remain vote.

Indeed, great news today RE: land sales. Muted response due to the looming referendum though; will surge again with a remain vote.

A number of broker upgrades and reiterations today. This bodes very well if we remain in the eu and this should surge with a remain vote to well over £6 again very quickly if that is the case on June 23rd/24th.

A steal indeed, if we remain in which I still think we will. If that is the case, I think this will be hitting £5 again on full year results. If not, there will be trouble I hate to say, the building boom will be derailed. Even though polls are starting to put brexit on the front foot, betting odds still put remain ahead with 58% probability. Just weeks ago when we touched £4.30 the odds were a massive 75% and remain looked certain. I still think the market will continue to be driven by polls and odds, falling or rising depending on what these say is happening. Until the time we know for sure which way the vote will go, investing seems almost gambling in these markets on the outcome- for that reason I remain fully hedged for now and this will remain the case until I know the outcome. I may forgoe the initial upside if we do remain, but that is a price I am willing to pay to forgoe any potential downside should we leave. For those interested, current 3 year average forward dividend adjusted value metrics for the sector put Redrow still well ahead, followed by Bovis and Crest and Galliford try, that latter two having sunk quickly recently. CRST 5.9 BVS 5.8 RDW 5.5 BWY 6.4 TEF 6.1 (although figures 1 year ahead- 2017,18,19 vs 16.17,18 for peers) TW. 7 Bdev 6.9 PSN 7.6 GFRD 5.9

Hi Graham, The market come sometime appear irrational at times, but on closer thought the move today was completely plausible. Like you say, the interim results were excellent, slightly above expectations infact and with the market in an ordinary mood these would have been very well received and we would have enjoyed a good rise. The problem is brexit and the increasing odds that we may well leave the EU. This will have catastrophic consequences for builders across the board for reasons I have previously outlined. You asked why Crest has today fallen further than the sector average, its a good question, and the answer as far as I see it is likely to be based on the fact the Crest has up until now solidly outperformed the sector and was trading on forward valuations much higher than sector peers such as Bovis and Redrow. Because the odds of brexit have increased, this results in a significant reduction in the expected future earnings from an expected value perspective (the forecasted growth and yield for this and other peers is more unlikely to be met as odds for brexit increase) and thus the market has adjusted down the share price to reach a risk premium consistent with the increased odds of brexit. This will continue to be the case as the odds fluctuate up until we know the final result. remain still has a 58% implied probability, but this is down from 75% just weeks ago when this was £6. If the odds tip further this will naturally decline, or vice versa, until we know the actual result. On a remain vote, this and the sector will fly and this will see £6.50 very quickly IMO. An out vote would conversely see this tank like all other builders- there is no getting away from that and with the referendum on a knife edge I would not like to be holding without hedging arrangements in the current market. For that reason I currently have several short positions open to mitigate downside risk from my actual holdings- it means that my entire portfolio doesn't really move much but I am willing to forgoe potential upside until I know the result of the referendum- then I will either close my short positions if we remain in, or sell my holdings if we vote out and keep my short positions open. GLA.. still think we will remain in. For those interested current 3 year forward average, dividend adjusted PE's are as follows: CRST 5.9 BVS 5.8 RDW 5.5 BWY 6.4 TEF 6.1 (although figures 1 year ahead- 2017,18,19 vs 16.17,18 for peers) TW. 7 Bdev 6.9 PSN 7.6 GFRD 5.9

Tomorrow, should be good. Whether they are good enough to counteract the growing brexit risk remains to be seen. FTSE futures indicating a red day tomorrow, but with a good set of interims we could buck that trend, fingers crossed!