Member Info for PaulCurtis

Thinking of buying but dissuaded by Thomas sales. Can anyone please advise if a non imminent doom reason, eg divorce, fab holiday…

I’ve listened to most of it but no mention of a raise and no Q&A reference! If likely then the analysts would have followed up?

Where was this mentioned?

TW had £2bn net debt and needed emergency RI, that’s why!

It’s the cheapest for sure but the risk is that it has the lowest booked forward sales, c. 30% whereas the big boys are c.60%.

Gleeson are therefore more ‘in the eye of the storm’

They claim they are the most resilient because customers will downgrade from rivals and they are cheaper than renting.

Will find out next Thursday……

Let’s hope that he is short, the alternative is that he’s a nutter. He has ruined any serious debate on ADVFN with his trolling

stt
Please don’t post such misleading nonsense! They had a very large surplus of enquiries, this has dropped 50% (so not 50% of actual sales!!!) but over a period of extreme market turmoil. We don’t yet know yet what the stabilised rate it.

They are not (yet) dropping prices! Prices fell 18.5% during the GFC and remember that new build should fall c. 5% less than old build.

Listen to the audio cast. Dividend has been stress tested down to 20% house price fall, 30% volume reduction. They will pay 7.5% of NAV down to these limits. They say it’s a cyclical business and by paying 7.5% of NAV, good times and bad, they give shareholders certainty

The worry is that sales conversions have been slipping every week since mini budget, they say that part of this is seasonal so can’t read too much into it….

Trading was to be expected, it’s not too bad so far.
Cut in dividend was an absolute given! A 17% yield cloud cuckoo land.
The increase from £75m to £350m was a shocker, especially since PSN appeared to have swerved this liability.
From memory a director bought £200K post September’s disastrous budget. Hopefully more buying this week

The Going Concern statement looks pretty bullet proof, 50% drop in sales and 20% and implies can still pay a reduced dividend.

NAV 2,720p versus 1.800p share price. On average HB’s have traded at a 1.2 x premium to NAV!

Markets always go to extreme valuations, either over bought or over sold. 1,800p is illogical because on a medium term view this will clearly be a lot higher. Buy now and be happy in a year or try to call the actual bottom and risk missing out

Manfor

Obviously interest rates will drop as UK enters recession. House builders have plenty of time to reduce production which will support prices. They are reducing land purchases to boost net cash.

Yes margins and profits will fall but this is now more than discounted in the share price. They will survive and bounce back strongly.

Bottom line, once interest rates start falling it will again be cheaper to buy than rent. This will fuel the next surge upwards, there are loads of prospective buyers looking to call the bottom

In 2008 the likes of Barratts and TW were stuffed by £2bn net debt and significantly lower NAV per share. They were highly geared. They needed highly dilutive RI’s to survive.

Today it’s the opposite.

Also totally different market dynamics. Much great undersupply and WFH is transforming the market re demand for that extra space/improved home life amenities. And less commuting means more cash saved.

And let’s not forget the lure of new build energy saving measures. If house prices fall 10% new build will be 5%

And all this talk of 6% interest rates is nonsense, the deflationary effect of this current stock market crash plus falling house prices will flatten the curve

Finally there are still a load of people desperate to buy….

What did you all get?

I tendered all my shares and buyback just under 2.5%?

They say oversubscribed but doing the maths I should have got 6%, 10m divided by 154m.

Flip side is that 154m tendered and only buying 10m? Confused

Manfor

The reason house builders were decimated in 2008 was that they entered a sudden crisis with massive amounts of debt eg Barretts and TW were c. £2bn net debt. They therefore needed highly dilutive c. £500m right issues and this wiped out share prices. Today Barratts are over £2bn net cash, TW £750m. It’s chalk and cheese. Worst case they can easily stay solvent by simply not buying new land, using the cash pile to pay off contracted land creditors.

Gleeson are an absolutely nailed on takeover target. Tasty snack size for PE or anther HB. Only problem is that all HB’s would want a share deal and their shares are bombed out.

Gleeson has a great balance sheet and is exactly the sort of HB that Truss will want to succeed. It’s suffered a sector worse share price decline but has the best growth potential. Good land bank as well, important to compare land banks and land creditors.

Vistry clearly not worried about the impending house price crash! They are probably the most resilient of all the HB’s but still indicates that the market has oversold the sector.

Berkeley, Bellway and Vistry all update this week, Gleeson next week. Results will be excellent, that’s a given. It’s all down to the forward guidance and especially what the HB’s are doing about the imminent slowdown.

I hope they temporarily reduce land buying, prioritise cash flow and use the money for massive share buybacks. Many are trading at a discount to NAV, crazy not to buy back

HSBC have downgraded the sector, claiming demand will drop 20% over next year. Barratt slashed from 930p to 430p! Now Hold from Buy.

Only share they still like is Vistry. However all the Brokers have different opinions! Berkeley , Bellway and Barratts seem to really split the pack

Barratts, Bellway and Vistry announcing results next week. I’m assuming will sanction massive share buybacks.

Also Liz Truss will have to do something re CoL which should help HBs.

And Corporation Tax cut will help

‘Building on the proactive approach to land investment in the prior year, the Group has contracted to acquire 19,089 plots(5) during 2022 (2021 - 19,819 plots, 2020 - 12,124 plots) across 107 sites(5) (2021 - 109 sites, 2020 - 69 sites).’

HB’s such as Taylor Wimpey looks better re land bank value because they bought more in 2020?

The dividend is very likely to be cut in a downturn since not covered. Brokers range from 150p to 175, still good at this price.

PSN has fallen 20% over the last month, rest have fallen c. 12-13%

Bull case 2,900p, Base case 1,600p and Bear case 900p.

Bear case assumes 7% fall in house prices and P/B of 1 (10 year trough is 0.8, 30 year 0.4 P/B)

Current Net cash is c. £780m? At the end of 2008 (Sub Prime and I assume the reason for the 0.4-0.8 P/B) total liabilities were £1.6bn and Net Assets £1.55bn. Gearing 40%. As I said yesterday, it is a ludicrous comparison?

Strictly

I’m loathe to compare historic P/B since so many other factors. You may have seen Morgan Stanley’s recent note The Big Bad Wolf? Their bear case for TW is 55p but imo their analysis is ludicrously flawed because they assume a P/B similar to past cyclical lows when HB’s were billions in debt (and required heavily discounted rights issues to survive) versus now when the HBs are sitting on shedloads of net cash. This is why I’m invested in all the HBs although I am range trading.

Re PSN margins, they have been criticised for not land buying during CV-19 and are now playing catch up at presumably less attractive prices. They are also suffering because HBs need a large pool of plots to navigate planning uncertainties.

Are their margins good because focused on the lower end of the market, maybe less competition and the building plot a smaller % of the overall cost?

Also are they able to make superior planning gains from change of use. eg upmarket HB’s such as Redrow more at risk from NIMBYs.

Maybe they are much more conservative in valuing their land bank?