Member Info for Josh95

Just a risk- reward adjustment the market has made. This had been holding up well, but with brexit odds increasing the risk to the economy and house building shares is growing hence the sell off here. If we do remain in the EU, which still looks likely, then this looks excellent value indeed at these levels. I'll be watching closely having sold a good few months back.

Holding up very well here, quite pleasing to see. Interim results are out 14th June, I am expecting a very solid set of interim's that should help push as back to £6 quickly. An in vote would see this rally strongly IMO; brexit fears, as with many sector peers, have been holding this back. An in vote would see this very quickly smash through £6.50 and have a strong run at £7 IMO. I expect an in vote would create a similar rally as we saw in last years general election.

Broken! Wow.. what a performance here over the past few weeks. Those of us who bought tranches at below £4.70 have seen a whopping 30% return in a mere 4 weeks. Stunning and still looks good value even at these levels.

Strong rise here today, very pleasing indeed, wiping out some of the valuation anomaly we identified last friday as the market appears to have finally caught onto this cheapest in sector stock. Still looks like the best value though at these levels and should be back to £4.40-£4.50 to be a fairer valuation at this point int time at least- still may need an update to get back on level terms with sector peers. Crest really has been pulling strongly. Latest comparatives: Crest: 6.9x Bovis: 6.6x RDW: 6.4x Nige, a couple of points: 1. Anyone who thinks house building isn't a cyclical industry is insane and doesn't know what they are talking about. Why do you think builders talk about "managing the cycle" in their annual reports?! 2. The valuations I have posted above DO factor in growth and infact value it, but go further by factoring in dividends and stripping these out for comparable average three year forward P/E's. And by taking an average growth over that three year period is by definition valued in the metric so you are essentially attempting to do a similar thing but in a cruder fashion. 3. Bovis is not overvalued on any metric and no other builder comes close to offering growth at a lower price than Crest, Redrow or Bovis over the next three years. For example Crest is forecast to grow EPS by a whopping 27% this year; far more than Galliford which you mention for example, which is only expected to deliver a mere 13% growth in comparison. Bdev is the cheapest of the three big builders and a better buy that TW and PSN at these levels, but I still don't like it- Crest, Redrow and Bovis are far stronger buys. Although I prefer Crest and Redrow myself due to poor management at Bovis.

Good rise above £4 today but Redrow now lagging significantly. Bovis and Crest have both flown past Redrow on three year forward average metrics. Current three year average dividend yield adjusted P/E's are: Crest: 6.8x Bovis 6.5x Redrow 6.2x All other builders are not really worth mentioning from a value perspective as they are rated at a significantly higher premium than the above three when factoring in earnings, dividends and growth prospects over the next three years. TEF for example still remains relatively expensive on a rating of 7.6x having recently seen its rating eroded significantly due to the ouperformance of the above three. Nige- these values adjust for dividends, growth in EPS and current earnings over the next three years already so the analysis already factors in the fact that redrow pays a lower dividend and reinvests more through retained earnings to grow its EPS- that is captured in the above metrics. Crest for example, although investing a lower proportion of earnings and paying out a higher percentage as dividends, is still able to grow earnings at a faster rate than Redrow looking into the future due to its superior operational efficiency; this can be seen by analysing the ROCE. For Crest the ROCE is a staggering 28%, whilst Redrow's ROCE has remained static at a reasonable 21%. Crest can therefore generate returns on capital (debt, equity and retained earnings) at a 28% superior rate than Redrow based on current performance. This means it can still grow earnings just as rapidly as crest but by retaining less and paying out more as dividends. Redrow still represents better value though trading on a dicount to crest of c. 10% based on earnings, pay out and growth over the next three years. I think the weak news pipeline is seeing redrow lag.

Really flying now, one of the top gainers in the sector.. live price touching £5.80 (+4%) the brakes are off! Trimmed a few of my 10000+ strong share holding here but only with the eye to buying back in a bit lower.

"We do not issue an IMS in April. We stopped doing so when the rules changed such that they are no longer required. We will update the market if and when required. Other than that we will be announcing our results in early September". Feb to Sept is far long to wait without newsflow and until RDW pull their finger out and issue an update I think RDW will continue to lag.

What has happened to the IMS RDW normally issue late April? I thought they were perhaps going to release an update alongside the GM but nothing was forthcoming. One of the reasons this has drifted down is not reflective of the company itself but rather the weak news flow IMO. A reassuring IMS would see this quickly back above £4. Indeed, since Crest and Bovis have released trading updates both have been valued upwards significantly leaving RDW in their wake. RDW is now valued as the cheapest builder in the sector on a three year average forward Price earnings yield adjusted metric (the best metric to compare overall capital growth potential which factors in yield for better comparison). I might shoot Investor Relations a quick email. I expect everything is on course and the weak news flow and thus low share price valuation is providing us with a compelling buying opportunity right now.

As expected a magnificent update pointing towards a very strong set of figures due out in a month just before the Referendum. Once the referendum is out the way, with an in vote, this will smash through £6 with ease IMO. GLA

GM on May 9th to approve Steve Morgans house purchases. I suspect Redrow may well issue its IMS on this date too, which usually would have been issued by now.

Well done Bazz.. an excellent level to buy in at- welcome aboard! Crest has now outperformed the entire sector for two days consecutively after its heavy sell off- very pleasing to see it well above £5 again so quickly. Half year end this week, followed by a trading update 2 weeks later and interim results mid June. This strong news pipeline should be supportive of the share price if sentiment remains reasonable.. hoping for a positive update from TW. on Thursday too. Once Brexit is put to bed, I think we will test and break £6 pretty quickly. Still think we will see continued volatility until Brexit is out the way though, although positive trading updates from the sector will obviously help alleviate sector wide concerns. GLA

The author also mentions BREXIT as a concern. This is a concern, and why I remain 50% in cash, but the probability of BREXIT materializing is low- probably around 30%. I think as we approach the referendum, if polls indicate growing support for a BREXIT, markets will dive and the £ will sink further still. This will strike fear into the public and make them realize the risks of a BREXIT are very real, and thus when they do come to vote I believe the uncertainty of BREXIT will be all too much and many will vote to stay in. If we stay in I think we can expect builders to rally strongly- therefore an investment at the current time is taking the view that we will remain in the EU which I believe will be the case. If we do leave, markets will sink further, a recession will follow and there will be other issues such as a reduction in the supply of foreign labour which is currently heavily relied upon for trades such as brickies, chippies and plumbers. I believe come July people will be kicking themselves for not buying at these levels- I reallocated some more cash (from other shares) into Crest today at £4.62 today as it is looking cheaper then Redrow on a yield adjusted forward P/E. Could drift down further which is why I recommend building a position by buying in batches on dips. Anything under a fiver should look like a steal come July. Good luck all.

Hi Bazz, The article is ill-founded IMO and appears to be written by someone who doesn't fully understand the sector. Slowing ASP growth- the author cites weakening overseas investment and a clamp down on BTL investors as an issue for the sector. I interact with many board level directors across the sector and the vast majority feel that should ASP growth continue on a steep upward trend, as it has done so over the past few years, then there is a huge cause for concern as such sharp growth is unsustainable. Many in the sector therefore favour much slower more longer term house price growth as this steers the sector away from bubble territory and ultimately expands the length of the cycle. I therefore see lower ASP growth as a positive, not a negative as the article suggests. Margins- the article cites spiralling wages and materials costs as a concern for the sector when coupled with slowing ASP growth. This is completely misinformed IMO, and in the case of building materials, completely out of date. A few years ago brick prices were rising rapidly but we are seeing the cost of materials ease over the past year as supply increases. Labour rates continue to grow but there has also been some steadying in this market too. The article also negates the fact that the material and labour costs it mentions are actually only a relatively small proportion of build costs- land is the big expense. And therefore modest ASP growth can fully support strengthening margins even in a world of build cost inflation. Its all about buying land at the right price and currently land availability is good. valuations- the article talks about misleading PE ratios and suggest a better metric is the Cyclically Adjusted Price Earnings (CAPE) ratio. It is true that the CAPE gives a better indication of value for a cyclical stock such as housebuilders but the analysis provided in the article is again misinformed; In the previous cycle builders balance sheets (especially TW. and Bdev) were massively overstretched at the peak of the cycle having made acquisitions and thus when the recession came their earnings were hit much harder. In addition the previous recession was one of the worst in living history- a black swan event if you like. Moving forward builders balance sheets are much stronger with 2008 fresh in the mind of many directors- they have planned for such events. The market conditions this time around are also completely different- interest rates are at rock bottom and will remain so for a long time. We are unlikely to experience a recession as severe as 2008 and therefore using a CAPE ratio covering a period which includes one of the worst recessions in living memory and at a time builders were overstretched, when conditions are completely different this time around, is misleading at best. The author is also taking a view that such a downturn in imminent- this cycle may well have years to run with growing earnings and thus falling P/E's!

Hi Bazza, No way of knowing whether this has bottomed yet unfortunately- short term your guess is as good as mine. With the referendum fast approaching I expect continued volatility and a number of buying opportunities. I am currently 50% in cash but I am very tempted to add heavily at these levels or below. I do feel Crest Nicholson now offers the best overall value in the house building sector however. This is a growth stock (with very strong margins and ROCE) that offers a phenomenal forward dividend yield: 5.6% for 2016, 7.4% for 2017 and 8.4% for 2019. Indeed on a dividend adjusted three year average forward P/E ratio Crest Nicholson now offers the best value in the sector-better value than Redrow at current levels (lowest forward P/E but weak dividend yield) having fallen further over the past week or two since the CEO sold a chunk of shares, amplified by brexit fears. Accordingly, on Friday I reallocated a significant amount of my portfolio into Crest Nicholson at £4.76 (no new cash yet, sold other positions to add here). It's very hard to say what will happen over the next few weeks and months- but the news pipeline here should be very supportive of the share price. Crests half year end is the end of April, and a trading update is due Mid May. Given the fact that there has been a rush of BTL investors desperate to buy before April the 6 months to April should be particularly strong. The results are out mid June- just before the EU referendum and should hopefully be supportive to the share price here. Once the uncertainty of the EU referendum is out the way I think housebuilders will continue to flourish (the conditions of low interest rates and a structural defecit of UK homes remain favourable) and hopefully get back to their 52 week highs and beyond-average broker price target for Crest is currently £6.81 which represents c. 43% upside (amongst the largest in the sector alongside Redrow). Bookmakers (usually a better indicator than Polls) currently rate the likelihood of a brexit at just 30%. That's not to say there will not continue to be volatility up until the results, but I remain confident we will remain in the EU- volatility will provide us with some excellent buying opportunities which is why I remain 50% in cash. I plan to keep adding to my holdings over the coming months on any pull backs. I do believe this is an excellent level to start building a steak here though- depending on how much you are considering investing though I would tend to favour adding in chunks on any dips- i think there will be a few good opportunities from now until the referendum. Good luck

For those with access- basically Jonas Crossland reiterates the point below about the "enormous" 30% discount to NAV and says even if the entire 9 Elms development was written off (which it would never be!) the shares would still be "absurdly" cheap at a 20% discount to NAV. Goes on to talk about the stength in the 6000 acre land bank covering areas such as Longbridge in Birmingham, in addition the strong rental incomes, and how it is difficult to see any other reasons for concern in the porftolio. Finishes by touching on the comment from the AGM I quoted somewhere below, where SMP state current negative sentiment around the 9 Elms development isn't anywhere near as bad as the share price reflects. Clearly the relentless buying by directors at £3 and below confirms they too fully agree with the above too.. suggesting significant value for anyone buying in at these levels. http://www.investorschronicle.co.uk/2016/03/24/shares/tip-show-st-modwen-s-too-low-wDptAlAEECyeA8FTrUELoL/article.html

This is an absolute gift at these levels. It is hard to see a better value buy anywere in the FTSE 350 on a risk reward basis. The sell off here is way overdone; 9 Elms is not worthless and represents just 10% of NAV- even if the entire development was written off, which would never happen as it could just be sold, these would still be trading on a 20% discount to NAV, which is crazily cheap. I see big rewards over the coming year for those buying in at £3.

Property developer St Modwen (SMP) delivered an upbeat outlook in a statement accompanying the annual meeting. The group continues to recycle capital by selling assets and using the proceeds for fresh acquisitions. And in the period from 1 December last year to 22 March, it raised £39m by selling mature assets at or above book value. Demand for residential land from third-party housebuilders remains brisk, and sales during the period raised £41m, all at or above book value. St Modwen has also developed its income-producing portfolio, and since November 2014 the annualised gross rent roll has risen from £45m to £60m. Further sites within the portfolio have been targeted for private rented sector development. Construction work is expected to start shortly on 201 apartments at the 110-acre site at St Andrew's Park in Uxbridge. Worries about the company's exposure to inner London residential appear to have been overdone. Its joint venture at New Covent Garden Market is expected to achieve vacant possession by spring next year, and St Modwen intends to sell, or develop it itself or through a joint venture. IC VIEW: The Nine Elms site accounts for just 11 per cent of net asset value (NAV), yet the shares are trading at a 30 per cent discount to NAV. This means that even writing off the site entirely would still leave the shares at around a 20 per discount to NAV. That's hard to justify. Trading at 308p, the shares are down from our buy tip (394p, 8 Jan 2015), most of the fall coming in the last two months, and with such a lowly valuation, we remain buyers.

Strong update, looks far too discounted at current levels: "We are aware of the negative sentiment expressed towards Central London, Zone 1 residential prices and Nine Elms in particular. Our share of NCGM, held in a 50% joint venture with VINCI Investments Ltd, accounts for 13% of our UK-wide portfolio. Having reviewed sales activity in the area it is clear that current market evidence does not support this level of negativity."

Of course, most housebuilders are experiencing the same solid trends and frustrations. What sets Redrow apart is despite its strong recovery, its valuation looks cheap. Its price to net asset value ratio forecast for the year to June 2015 for example is just 1.4; that's well below the sector average of 1.9, and, with the exception of Bovis (BVS), is the cheapest in the sector. Its PE ratio is also one of the lowest at 8. Set against this, the return on capital employed at the half year was stuck on 21 per cent, slightly below the sector average. And while the dividend has shot up, the yield still has some catching up to do. IC VIEW: Steve Morgan still owns 40 per cent of Redrow, and its clear that his influence has been largely instrumental in putting the housebuilder back on track. Analysts at Peel Hunt reckon net assets could grow by 15 per cent over the next three years against 11 per cent for the sector as a whole, and they have put a price target of 555p, which suggests a potential 33 per cent uplift in the share price. Buy.

“If I had returned before five months ago, we would probably not be in as big a mess as we are now”. So said Redrow ’s chairman Steve Morgan in September 2009, when he came back, after leaving the board in 2000, to rescue the housebuilder he founded 35 years earlier. Since then, Redrow has come on in leaps and bounds, recently doubling its interim dividend. But it’s still cheap compared with its rivals, which suggests there is room for more recovery. Back in 2009, in Mr Morgan’s absence, Redrow had been chasing land when prices were already looking stretched, and building less expensive houses. After legal completions fell in that year, gross margins collapsed from 18.5 per cent to just 1.8 per cent and there was a near £100 write down on the land bank. Fast forward 7 years and trading in the six months to December 2015 brought record profits. Legal completions grew by 18 per cent to 2,178, and the average number of sales outlets grew from 101 to 121. And things look good going forward, with the private order book ahead by 51 per cent from a year earlier at £655m. Average selling prices were up a more sustainable 2 per cent, but the modest increase also reflects a nice piece of timing as the group shifted its focus away from high-priced central London apartments at a time when the top end of the market slowed rapidly. Emphasis now is on the more fashionable outer London commuter market, where average selling prices were up 11 per cent at £300,000. And with impaired sites and cost price inflation both moderating, gross margins grew from 22.3 per cent to 24.2 per cent. REDROW (RDW) ORD PRICE: 415.4p MARKET VALUE: £ 1.54bn TOUCH: 415-416p 12M HIGH: 505p LOW: 337p FWD DIVIDEND YIELD: 3.2% FWD PE RATIO: 7 NET ASSET VALUE: 246p NET DEBT: 20% Year to 30 Jun Turnover (£bn) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p) 2013 0.60 70 14.8 1 2014 0.86 133 28.3 3 2015 1.15 204 44.6 6 2016* 1.32 230 50.7 10 2017* 1.47 265 58.4 13.5 % change +11 +15 +15 +35 NMS:3,000 Matched Bargain Trading BETA:0.74 *Peel Hunt estimates It’s possible that sales numbers could grow even faster, but the ability to bring new outlets on-stream is being hampered by the still largely dysfunctional local planning system. Around 9,000 plots or 42 per cent of the current land bank covering 60 new outlets is tied up in the planning system. Of course, most housebuilders are experiencing the same solid trends and frustrations. What sets Redrow apart is despite its strong recovery, its valuation looks cheap. Its price to net asset value ratio forecast for the year to June 2015 for example is just 1.4; that's well below the sector average of 1.9, and, with the exception of Bovis (BVS), is the cheapest in the sector. Its PE ratio is also one of the lowest at 8. Set against this, the return on capital employed at the half year was stuck on 21 per cent, slightly below the se