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Great article , all over the front page of todays shares magazine / AJ Bell

Valuations are cheap and dividends are generous..We are turning positive on the housebuilding sector on the basis that shares in the biggest companies are currently too cheap to ignore. Some are offering dividend yields in double-digits which are supported by strong balance sheets.

In our view the robust financial positions enjoyed by the sector heavyweights means they can afford to keep paying generous dividends even if house price ease back. Many of the housebuilders are sitting on significant amounts of cash which puts them in a very strong position.

We believe share prices will rise to reflect increasing market confidence the promised dividends will be paid.

We are most positive on the high-yielding trio of Barratt Developments (BDEV), Bovis Homes (BVS) and Taylor Wimpey (TW.) which are also trading on relatively attractive price-to-net asset value (NAV) ratios.

Sentiment towards the sector is beginning to improve but on valuation grounds it is still trading at a level comparable to that seen immediately after the savage sell-off it endured in the wake of the 2016 EU referendum result.

That means investors have a chance to buy stocks that are cheap and also offer considerable income appeal.

HOW ARE HOUSEBUILDERS VALUED COMPARED TO THE IMMEDIATE AFTERMATH OF THE BREXIT VOTE?

Housebuilders tend to be valued against their assets using the price-to-book metric – also known as price-to-net asset value (NAV). However, the price-to-earnings (PE) ratio still provides a useful yardstick of how the sector is being priced now compared with history.

The FTSE 100 housebuilders’ average PE, according to Refinitiv data, is 7.7-times against 7.5-times in July 2016.

Even on a more traditional price-to-NAV basis housebuilders trade at a similar level as they did in July 2016 based on data from Canaccord Genuity. Its universe of housebuilders are trading at 1.27-times NAV today against 1.24-times at the sector’s low point on 8 July 2016. In general, housebuilders are deemed too expensive when they exceed 2.0-times.

It is important to stress that the outlook isn’t entirely rosy for the housebuilding space. The pressure on earnings that we highlighted in our 5 July 2018 feature Housebuilders: farewell mega profits? remain but the difference now is that the sector has sold off heavily from the highs seen in summer 2018.

What we said last summer:
‘Get out, wait until the market has had time to price in lower earnings and there has been a natural rotation for investors out of the sector; and only then potentially consider buying back if valuations have dropped to really attractive levels’

WHY ARE WE SAYING TO BUY AGAIN?

We believe the challenges facing the housebuilders – the main one being their ability to achieve the required growth in average selling prices to compensate for rising build costs – are now factored in to their market valuations.

UK builders’ Brexit bargepole is getting shorter..
LONDON, Jan 16 (Reuters Breakingviews) – Last year, UK housebuilders acted as investors’ Brexit stress squeezers. Taylor Wimpey , Barratt Developments , Bovis , Persimmon and the other large firms saw their share prices fall by an average of 15 percent as they became a proxy for the risk of a disorderly British exit from the European Union. The bad vibes are starting to look overdone.
Over the last decade, investors buying shares in the big builders could expect a dividend yield of just under 6 percent on average, according to Refinitiv data. Right now, the average forward dividend yield is above 10 percent. That implies investors should either be bracing for big cuts to investor payouts – as might be expected if Brexit upends UK house prices that rose 2.8 percent in the year to November – or that the sector is somewhat undervalued.
Evidence for the latter is accumulating. Taylor Wimpey sparked a mini rally in the UK housebuilders on January 9 by saying completions were up and selling prices were holding steady. Persimmon said on Tuesday it was on track to beat its pre-tax profit expectations for the year. On Wednesday, Bovis led the builders’ shares even higher by promising to deliver record operating profit for 2018. Underpinning it all is the defeat of Prime Minster Theresa May’s Brexit deal late on Tuesday. Investors now expect a softer Brexit or a second referendum that could mean no EU exit at all.
There’s admittedly still a case for pessimism too. Near-full employment and cheap money are shielding the UK housing market from Brexit jitters, but these could change. If the current UK political mayhem winds up with the opposition Labour party in power, the state might be able to compulsorily purchase sites at knockdown rates.
Still, housebuilders look well protected. Bovis includes a net profit margin of around 21 percent when it sells a house, and builders in general can control the supply of houses from land banks. Unlike 2008, most also have net cash rather than big debt piles. With a cushion against the downside, investors should be turning their attention to the opportunities.

My money is on John Bercow seizing control today hence letting MP's debate on what happens next, not just the government

It said that the UK housing market “remained stable” through 2H 2018 with a
physical order book 11.8% ahead at 9,783 homes and in Pound notes +8.3% at
around £2.4bn. These are impressive percentage gains. Similarly, the 2H sales rate
per site per week edged up from 0.71 to 0.77 units. At the same time, underlying
prices in the period, and in the order book, “remain in line with the first half of the
year”, while build costs are expected to increase by 3% to 4% this year.
Unusually, the statement included a section headed ‘Political outlook’, which
included candid comments. “Looking ahead, whilst current forward indicators for
sales continue to be solid, unsurprisingly due to the heightened political and
economic uncertainty, we have seen some signs of customer caution, particularly in
the South East. We expect next year’s volume to be broadly flat in current market
conditions. As we transition to our new strategy, there is the potential for significant
growth from 2020 onwards, as previously indicated”.
With this in mind, too, the Group has “taken the precaution of increasing the
investment margins and returns at which we acquire land.”
Finally, in Spain, where the first week in the November order book was at 330 units
(2017: 388 homes),, another strong operating profit is expected for the year (2017:
£26.8m).
Volumes for 2019 expected to be broadly flat,but potential for significant growth from 2020
onwards

Barratt is a peerless salesman and its latest order book is proof of that, especially
given the caution espoused by Crest Nicholson and the like. Its total order book at
14 October was up 12.4% in Pound notes at £3.15bn and up 5.1% by volume to
12,903 units. Okay, if we wanted to be picky, the composition of said order book
highlights an industry trend towards affordable housing i.e. the value of private
orders was actually down 5.3% at £1.7bn while affordable was up 45% at just over
£1bn (and not forgetting JVs where the cash gain was also over 40% at £424m). By
units, private sales were ahead 2.3% (at 5,446), affordable +10.2% (to 6,615) and
JVs off 11.3% (at 842).
These data also show their own story in terms of average selling prices: in the private
sector, they are down 7.5% at £312,000. However, in affordable there was a gain
of 31% to £155,000 while JVs added 60% at £504,000.
Being similarly picky, too, net private reservations per active outlet per average week
were at 0.72 (2018: 0.74) ex-JVs in the first 15 weeks of the financial year i.e. this
is a dip of 2.7%.
The UK’s largest housebuilder “has made a strong start to the year. In [fiscal] 2019,
we are focused on implementing our new medium-term targets throughout the
business. The Board is confident of delivering a good financial and operating
performance in [fiscal] 2019”.

https://www.****************************************interviews.com/wp-content/uploads/2019/01/UK-Housingbuilding-Book-January-2019-4.pdf

With the sector upgrade from over the pond we really could / should start to see some REAL momentum...hopefully starting at 230 this afternoon!!

Sorry not RNS Reuters:-

BRIEF – Petrofac Secures Engineering Design Services Contract In Brunei
Jan 10 (Reuters) – Petrofac Ltd :

Petrofac Secures Engineering Design Services Contract In Brunei
Deal To Provide Engineering Across All Phases Of Asset Lifecycle For Entire Portfolio Of Onshore & Offshore Assets For Bsp & Blng
Co & Partner Serikandi Oilfield & Services Sdn Bhd, Secured Multi-annual Engineering Design Services Contract
Won Contract To Support Brunei Shell Petroleum (Bsp) And Brunei Lng (Blng) In Brunei

Lets the forget todays RNS securing the Brunei contract as well Warthog!

Lets the forget todays RNS securing the Brunei contract as well Warthog!

Ive no idea to be honest. You would guess so but so many political / global economic factors its impossible. What I do know is OIL is flying!!

This will definitely help us / the sector

TW=

UK current trading

We will report 2018 full year results in line with expectations. The housing market remained stable throughout 2018, set against the backdrop of an uncertain macroeconomic and political environment. During the year, we saw good levels of demand, which converted into strong sales rates across the business.

Solid update

Good news

Definitely very strong now. PFC has DOUBLE gapped up on the daily chart!

Oil and builders for me Sunset at the moment. Its starting to feel like the bear is turning bull. Next weeks vote could take us back. I will consult the crystals.

PS as for Barratts theres no way Im selling for under 690..median Broker value is still 697.5

I'd go with Barratts own website over LSE Tom to be honest (which also aligns with many other sites I use)

Hi Nige,

Its definitely a very rare opportunity but timing is tricky. After failing miserably to enter at the lowest point so many times Im now happy just to get in (given liquidity) at a decent price.

This is a couple days old but makes a few good points:-

https://uk.reuters.com/article/us-britain-eu-housebuilders-stocks/uk-housebuilder-shares-bounce-as-traders-hedge-brexit-bets-idUKKBN1O4232

Some Market markers now saying that demand in the sector will be pushed up if a deal is struck

Whats crazy is this opened at 550 and there was liquidity in the pre market auction as well. Simply because Jefferies put a BUY from HOLD on it yet reduced the target to 590 from 640

DaleKid I doubled check mate not sure where you are getting that date from?

http://www.barrattdevelopments.co.uk/investors/financial-calendar/upcoming-events

Hi Mkx

I think the vote is now the 15th so a week tomorrow. You would expect a drop on a no deal but then it could surprise us as people buy in simply due to BREXIT simply moving forward. Some may also view it as a step closer to a second referendum (wrongly or rightly). I really wouldnt like to call the impact on the SP

Hi mate

Next key dates are

Wednesday 6th February, 2019
Half Year 2019 Barratt Developments PLC Earnings Release
Thursday 9th May, 2019
Barratt Developments PLC Trading Statement Release