Member Info for Josh95

Nige, Like I say you need to understand the businesses moving forward. PSN won't be growning EPS by 39% yearly moving forward as there is no way the operating margin can improve as drastically as it has done this year. Conversely, other builders such as Redrow and Bovis can as they are starting from a lower operating margin to begin with, this coupled together with their superior % increases in output will result in superior P/E ratios and PEG ratio's than even possible for Persimmon, TW. and Bdev as already illustrated in broker forecasts! I'll be selling this probably cum div and reinvesting in Crest or Bovis in time to collect their dividends. You obviously havn't read PSN's report/strategy as they have already outline their dividend will be £1.10 yearly until 2019! and this dictates that it won't grow as quickly as Redrow, Bovis and Crest because the dividend is only covered 173/110 = 1.5x by EPS and thus only the balances is reinvested into retained earnings on the balance sheet! Bovis already yields nearly 5% but the EPS cover is nearly 3x and thus the balance sheet and business will grow faster as will EPS and yield! Brokers recognize the above- hence price targets of only 10% higher for PSN but 50% higher for Bovis and similar for Redrow and Crest.

Just notice it cut off the bottom of the comparatives, here they are: Bovis 2018 Forward P/E = 6x Forward P/NAV = 0.9x Forward divdiend yield = 7% PSN2018 Forward P/E = 10x Forward P/NAV = 2x Forward divdiend yield = 5.5% Bovis is used as an example, similar story with Crest Nicholson and Redrow. Personally my all round favourite is Crest because it offers the best of everything- similar margins to Persimmon with excellent operating efficiency too, but the growth and south easterly presence of Bovis butwith a dividend that will grow higher than all of them and management as strong as Persimmons with an incredidlbe land bank too. Redrow is a good shout as well but with a far lower dividend yield. The only question over Bovis is its management which IMO is the weaskest.

Good rise today! I still expect this to tick up further up to the ex div as buyers come in for the absolutely colossal £1.10 dividend!

Similar story as to why I rate Redrow & Crest above the likes of TW., PSN and Bdev- as do most brokers! Carrying on re Bovis, you can see in 2018 if you had bought the shares now the current consensus is that you will have paid £10 for a £1 of earnings at PSN, or just £6 for a £1 of earnings at Bovis! Regarding operating margins, as Bovis ramps up volumes over the coming years the operating margin will rise as will ROCE. Persimmon may look good now, but it has far less room and/or strategy to improve than Bovis does from here, and thus it is highly likely that the shareprice of companies such as Redrow, Crest, Telford Homes, Bovis Homes and Inland Homes are all better medium term buys. I'm purely in here temporarily for a short term dividend trade!

Hi Nige, Several quick points: 1. A stock comes with dividends "cum div" if you buy any time before the ex dividend date. On the ex dividend date anyone purchasing the stock no longer has the right to the dividend, hence "ex div"! 2. Your point about margins and profitability is of course true by definition, but what you are failing to appreciate is the price you pay per £ of earnings attributable to the shareholder which by definition takes you back to an analysis on P/E ratios. Persimmon has a P/E ratio of c. 12, where as Bovis's for example is just c. 9. This tells you that for £1 of earnings attributable to the shareholder you pay £12 at Persimmon or just £9 at Bovis! You tell me which is better value?! 3. You're comparing histrocial performance and your analysis shows little appreciation or knowledge of the businesses you are trying to price, or indeed the story behind the figures, which is the only way to know how the businesses key financial metrics and thus share price will likely develop moving forward. Persimmon is a highly efficient market leading house builder with the sector leading operating margins and ROCE. Its efficiency means it generates the most profits for its asset base and thus it looks the most costly on a price to NAV metric at 2.5x. This compares to Bovis on a price to NAV ratio of the lowest in the sector of a measely 1.2x. There is ofcourse a reason for this and that is the incredibly low ROCE and lower than sector average operating margin at Bovis. What you are failing to appreciate however is the VERY different business models. Persimmon is not looking to grow volumes hugely, they will increase output, but no where near as fast as Bovis who plan to nearly double volumes over the coming years. Part of the reason the operating margin and ROCE are so low at Bovis is because it is deploying new Business Units and operations - investing much more heavily in land than Persimmon so that it can ramp up output more significantly, leading to far faster growth than Persimmon will offer moving forward If you had knowledge of the business activities of the the builders too, you would appreciate the fact that the reason Bovis's operating margin is so low is partly attribuatable to the mix or product it sold in the 2015 financial year; planning delays caused it to sell far more lower margined and social units than will be the case this year, and thus when you understand the overall picture of the businesses you can see that Bovis's growth profile is far stronger then Persimmons. Should the economic recovery remain in place, Bovis will outperform Persimmon by a huge margin over the next three years. To see this simply look at analysts forecasts who paint the picture behind the numbers and business model knowledge for you: Here are the forecasts for 2018 for both: Bovis 2018 Forward P/E = 6x Forward P/NAV = 0.9x Forward divdiend yield = 7% Persimmon 2018:

Nige, you will be entitled to the dividend if you buy before the ex div date on 3rd March. I bought some yesterday at £20.33 as I think there will be a tick up to the ex dividend date. I don't think you get the point with Bovis and Crest. The attraction is they are rapidly growing businesses, Bovis is set to nearly double output over the coming years, PSN is not as it is a mature business and thus growth will start to slow now. If the economic recovery continues Bovis will outperform PSN over 3 years. Yes PSN is run in a more efficient manner as can be seen from the sky high ROCE and margins, but that is also why it is priced on 2.5x NAV compares to 1.2x for Bovis! Far more potential medium term in Bovis, Crest and Redrow- you need to understand the business strategies moving forward not just look at the historical performance. This is still a great income buy.

I found the operating margin growth particularly impressive, this was a full 100 BPS ahead of analyst forecasts and almost entirely accounted for the the additional c. 10% growth in EPS than analysts had penciled in. Even more impressive was the fact that the operating margin balooned further to a staggering 23% for the second half of the year. Persimmon is a very well run, lean, mean dividend paying machine!

The FTSE 250 still contains miners and oilers who rallied yesterday on the back of commodity price rises. Many other FTSE 250 constituents are exporters to the EU, so a weakening £ sterling is good news as it makes their goods relatively less expensive to import and thus demand rises. For housebuilders a weakening £ sterling is bad as this brings forward the likeliness of interest rate rises, hence the sell off. In addition house builders are importers of EU labour, and an out vote would squeeze margins by limiting their access to labour. Labour on site would become even more constrained if we exited the EU and this would push labour costs up, squeezing margins hence why yesterday was a very bad day for the sector.

I think the main concern was the potential Brexit and the depreciation of the £ sterling. The possibility of a Brexit is creating downward pressure on the £ sterling which could well fall much further should an out vote materialize. This may cause Mark Carney to increase, or at least talk about increasing, the interest rate earlier than currently anticipated in a bid to support the £ sterling. There are also further complications a Brexit would cause for house builders such as eating into margins by stemming the flow of labour from the EU which is currently heavily relied upon. All these concerns, and the talk of a potential recession, are creating alot of volatility in the house building sector and whilst such uncertainty over the UK's EU status remains this will remain the case.

2018 is a long way off, and potentially we could experience a recession around or indeed before then. But when you look at the broker forecasts for 2018 as the strategy here unfolds, where else can you get this value? 2018 forecasts: Bovis p/e ratio = 5.4 P/b ratio = 0.89 Dividend yield = 8%

Indeed, unfortunately the referendum is going to bring much volatility to the sector for a variety of reasons. The biggest concern, and perhaps the main reason for the sector sell off today, is the plummeting pound. The fears are that with the raft of high profile political figures joining the out campaign, this could increase the possibility of an out vote materializing thereby leading to further depreciation of the £ sterling. This would cause Mark Carney to talk, and maybe even act upon, raising interest rates much sooner than the market currently anticipates in an attempt to support the £. Obviously this would be bad for house builders. Even so, I still feel the sector offers significant value and fears over weakening margins and potential recessions seem overblown!

EPS more or less exactly as we calculated- 95.3p. Book value coming in at £7.14. Dividend as previously confirmed- 40p for the year. That puts us on some of THE best value trading metrics on the sector: P/E = 917/95 = 9.6 P/B = 917/714 = 1.28x Yield = 50/917 = 4.4% Given the growing volumes and the fact the 2015 saw a weak mix of private vs social completions, volume growth and ASP growth (through both market price appreciation and improved product mix) are very likely to result in some of the strongest EPS growth in the sector her over the coming 1-2 years which will further strengthen book value per share, lower P/E and result in a market leading dividend yield several years out.

"In an analyst rating update on Thursday shares of Redrow (LON:RDW) had their rating reiterated by analysts at Goldman Sachs. The broker said it has now set a ‘Buy’ rating on shares of Redrow with a price target of 585. The price target according to the broker shows a possible increase of 41.41% from the current stock price of 413.7." Today we are trading ex dividend 4p, and have ticked up to a live price of 418.4 that represents an effecive gain of 7.2p or c. 1.7% today, in line with the sector.

Something seems to be holding Redrow back over the past few days, it has remained very much static whilst other builders have enjoyed a nice rise( most notably Bovis and Crest which I'm also in). We would expect to see the same here especially given the fact that today the stock comes with 4p dividend. Maybe it was the article in Questor which attacked all house builders but named Redrow as an example. The article was completely ill founded however, but perhaps explains the temporary under performance here.. I'm still hoping we will see a tick up towards the end of the day to reflect the fact that this will be dropping by c. 4p tomorrow as it trades ex div, ceterus paribus.

Deutsche Bank on Tuesday reiterated Bovis Homes Group PLC’s analyst rating as ‘Buy’ with its price target of 1318 highlighting a potential increase of 52.72% from Bovis Homes Group PLC’s current price of 863.

Last day to be in for the 4p dividend tomorrow, before we go ex div on the 18th. Even though its a small amount hopefully we will see a small drift up to reflect this. Obviously we expect to drop by 4p on 18th Jan, ceterus paribus, when this trades ex div.

The calculations below take a conservative view, and it is entirely possible that ASP's could indeed increase more than my calculations anticipate given the strong weighting to the South East here. It is very easy to see therefore why Jefferies state this offers THE best value in the sector. Another nice piece from Reuters sums it up nicely: "On valuation grounds Bovis presents THE most compelling investment case in the sector, Jefferies writes, keeping "buy" rating" "Bovis trading at an 18.5 pct discount to peers on a forward P/E basis, Reuters data shows, despite 12.5 pct gain y/y" Imagine what would happen to the EPS, PE and thus dividend yield, ROCE and book value if the ASP's here shot up to the UK average 300k- which is Redrow's average ASP! So much room for growth here!

Until results. Lets use some of the hints in the trading update to estimate what the results might be! Last year revenue was 809m. I calculate from the trading update that volumes increased by 3934/3635 = 8.2%. Next up I calculate that the average house price sold increased by 231/216.6 = 6.6%. We can therefore calculate that the revenue likely to be reported by Bovis will be c. (809m* 1.066)*1.082 = 933m. They also state that the operating margin has increased to "Over 17%". Let's take the pessimistic view that it increases to 17.1%. That will leave us with operating profit of 0.171* 933mn = c. £160mn. Making a simplistic assumption that the tax rate is 20%, that yields net profit of 160*0.8 = 128mn. Lets divide that through by the number of share in issue of c. 134m. That yields us EPS of 128/134 = 95p. You will note my estimated calculation is nearly identical to broker forecasts which vary between 94p-97p. Interestingly I can also estimate the book value of the share. To do this I take the operating profit we calculated of 160mn. Next I divide through by the ROCE, which is stated in the trading update will exceed 18%. Lets take the worst case scenario of 18%. 160/0.18 = 889. That gives us a rough estimate of the capital employed by the business. Dividing through by the no of shares in issue gives us 889/134 = 6.63 which is a book value of 663p yielding a price to book multiple of 835/663 = 1.25x! My calculations above ignore some more intricate financial details, but I have also taken the lower end of the reported figures to take a conservative view and therefore it is entirely possible that Ritchie could be leaving some further upside in the figures (wise to). On my calculations that would place Bovis trading on a PE of 835/95 = 8.78 and a price to book of 1.25x, with a dividend yield approaching 5%. It is also interesting to note that the average selling price for the 2015 financial year is only £231k! That is extremely low for a business that concentrates in the more expensive South East. Average home prices have now risen to £300k and the £231k above reflects the fact that the 2015 period was more heavily weighted to lower value social completions. Lets anticipate what 2016 may bring. It is entirely possible that with the much higher number of private completions anticipated in 2016 ASP's could push ASP's much nearer to the £300k uk average. We will need to keep an eye out on trading updates to see how this figure develops. Lets assume though that the ASP's don't rise anywhere near too 300k, and just rise to 260k which is still cheap for the South East. That is an ASP growth of 260/231 = 12.5%- very reasonable given the circumstances. Lets also assume volumes rise by 8% as they have previously done so. Revenue would then grow to (933 * 1.125)*1.08 = 1134k. Lets assume the operating margin only edges up to 17.5% yielding operating profit of 198k. EPS = 198k*0.8/134 = 118p. P/E = 835/118

10k share purchase by Richard Mully on Friday! Interestingly Mr Mully was previously head of real estate investment at the bankers trust and a managing partner at Soros real estate partners. He obviously knows the real estate sector very well then, and seems positive on St Modwen, despite the concerns over 9 Elms and wider macroeconomic fears, at these levels having doubled his holding to 40k shares over the last two weeks.

"On valuation grounds Bovis presents THE most compelling investment case in the sector, Jefferies writes, keeping "buy" rating"