Part 2..16 Apr 2015 16:32
That’s the main reason why analysts at W.H. Ireland calculate the company has a sum-on-the-parts valuation of 100p a share.
Developments with bumper profit potential
For instance, consider the value in Inland’s flagship development project at the former MoD site at Wilton Park in Beaconsfield, Buckinghamshire. This site was acquired for £35m last year including deferred consideration of £29m to be paid over the next three years. A planning application is being submitted for a development of 350 homes, and should be approved after the Development Brief was adopted by the South Bucks District Council at the end of March. This is prime real estate with houses in the area amongst the priciest in the UK outside London. Indeed, based on a gross development value of £300m, the average price per unit is around £860,000 per home, so there should be bumper profits to me made. Using a 25 per cent gross margin and an 80 per cent profit share implies a post-tax profit of around £47m for Inland, or the equivalent of 23p per Inland share.
Excluding Wilton Park and other joint ventures, analysts estimate that the open market value for the company’s 1,656 plots of owned land is in excess of £80,000 a plot, or more than double the implied carrying value in the company’s latest accounts. The difference between book value and open market value on these land holdings alone is around £70m, a sum worth 35p per Inland share. It’s not difficult to make a case that once you mark all the company’s land holdings to market value, including the value tied up in land under option, then Inland’s true net asset value per share could be easily be treble the 33.3p figure in the latest accounts.
Potential bid target
It’s not beyond the realms of possibility either that the UK’s largest homebuilders may be tempted to swoop on Inland as an easy way of getting their hands on a valuable land bank located in prosperous southern England. It’s highly unlikely that I am the only one doing the above calculations. And with Inalnd’s top six shareholders owning 34.6 per cent of the issued share capital, including founder Stephen Wicks who has an 8 per cent shareholding, then surely any take-out price would have to be close to the 100p sum-of-the-parts valuation. Importantly, the company is well funded: net debt of £28.8m, including zero dividend preference shares of £12m, represents 42 per cent of shareholders funds.
Admittedly, I am not banking on a takeover at this stage, but I still feel that the hidden value inherent in Inland’s land bank is yet to be properly reflected in its market capitalisation even after applying a small cap liquidity discount. In fact, applying a 20 per cent discount to sum-of-the-parts valuations implies a share price closer to 80p, or almost 25 per cent above the current level. The shares are reasonably priced on an earnings-based v
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