Member Info for PaulCurtis

PSN have sector leading margins but how will they maintain this as they deplete their historic land bank and build out more recently acquired land? They didn’t buy cheaply during Covid when TW did.

Also PSN is one of the few HBs trading at a premium to NAV. I hold all the HBs but prefer TW and Vistry. Sold a large chunk of into Redrow into recent spike.

Investec have said they expect dividend to be nearly halved next year. This is why shares are falling! Even so, now in the price

Except that inflation is two edged. Some material prices are now falling and will obviously fall more with any slowdown. Hence we would get falling house prices and falling inflation

Share price clearly reflecting market concern that the dividend will be cut. PSN did not specify the next dividend today?

How much of a cut is now in the price?

That’s 500p for OTB!

Strong summer trading results from Tui today albeit uncertain outlook

Peel Hunt have 500p Price Target

Agree that c.100p implies that cash is dangerously low but why? Summer season should be cash generative. And they appear to have sufficient banking facilities in place.

No shorters is a good sign.

House builders may be the canary re cost of living issues. They are all down today on house price concerns next year but current trading is still strong. ie there is still plenty of money out there. TW announce tomorrow.

Only other -ve is that OTB handed back deposits in cash and are now struggling for market share as rivals redeem coupons. But this must be short term and OTC should gain goodwill

Now read the MS note which I don’t understand.

Their bear valuations are based on arbitrary future discounts to current NAVs based on max discounts over both the last 10 years and last 30 years. This looks nonsensical. Discounts to NAV reflect markets concern that TW will go bust. How can you possibly compare 2008 and with now?

O/W, PT 3,066p
Higher PBT margins expected H2 v H1. Confident on 2023 volume growth. Build cost inflation higher than peers at 8-10%.

Demand remains strong but current seasonal lows not as good an indicator as Sept/Oct so must wait for better idea re underlying trend. Expecting some moderation in sales next year but higher outlet numbers will compensate.

Also TW trading at a discount to NAV whereas Perimmon is at a significant premium. I hold all the HBs since a great mid term buying opportunity and no one can call the bottom. If house prices fall more than 20% then nothing will be safe. Will chase down my favourites - TW, Redrow and Vistry.

Re MS note, it’s titled ‘Big bad wolf to blow on HBs’. They favour Berkeley and Barretts with a Neutral and underweight TW and Persimmon as most exposed to cost of living squeeze. It’s all macro. Expect media coverage in tomorrow’s papers.

Thanks I was rechecking my note and see that the new CEO confirmed their commitment to the 7.5% NAV dividend and that this had been stress tested down to a 20% house price fall/30% fall in volumes. This was at the CMD end May

Wigan

Good post. I’d add that chronic shortage of land, WFH and cost of renting will support prices. And imo interest rates won’t rise as high as some fear although only because we are teetering on recession!

Very interested to see that Morgan Stanley have updated this morning. They have slashed TW from c. 180p a few months ago to 104p, Underweight! This is out of kilter with all other recent broker updates which are averaging c. 180p.

They have slashed other HB’s as well, including Persimmon at 1,600p. According to a tip in the Times today, Persimmon is rated Avoid, in part because they didn’t replenish their land bank at cheap prices during Covid and are now having to pay top $. However TW raised £500m at 145p mid 2020 to do just that.

And Directors recently bought £70K of shares (plus £500m during above placing).

So how on earth can Morgan Stanley say 104p?

I won’t get the note until next week but intrigued! May be it’s just gauging poor sector sentiment, the price needs to go beyond crazy before the institutions pile in.

I am a bit concerned that TW is about the only HB being shorted? Albeit under 1%

Vistry Friday

Persimmon trading update tomorrow.

Baffled

Good post and I’m also a value investor. I’m invested in all the house builders but biased towards, Redrow, TW, Vistry and Crest (although top sliced this a couple of days ago).

The Persimmon divi is highly attractive in an ISA but my concerns are the premium to NAV and it’s the only HB currently being shorted, albeit small time.

I’m increasingly buying usual suspects investment trusts, trading at historically wide discounts 10 to 20% discounts to NAV. Impossible to call the bottom (looks dire but that’s normally the bottom) so drip buying on sell offs.

I particularly like IPO as a wild card risk reward (72p, NAV 139p, £250m cash) but the biotechs such as WWH look good long term.

Total NAV was £1.738bn at YE of which the Portfolio was £1.5bn.
Hence factoring in the 40% Portfolio reduction at mid March Finals reduces the £1.5bn by £0.6bn to £0.9bn.
Taking the £0.6bn off the £1.738bn reduces NAV from 167p to 109p. Oxford has since fallen even further so NAV now just over 100p?
Above a bit simplistic and assumes unlisted have also fallen 40%.

Bellway has dropped £900bn since Gove and this latest liability appears to be sub £300m and I suspect that is subject to negotiation/clawback. We need a deal so that downside can be quantified and valuations based on the balance sheet and not group think sentiment

The reference to a significant cladding liability when timeframe extended to 30 years. My understanding is that was already in the share price but clearly spooked the markets.

But a vast amount of bad news already factored into the share price. Now trading under NAV and at 15 month low.

Gove is blustering, a deal will be done.

Inflation yes but this is a concern for all equities. Right now house builders still have pricing power .

Sell off due to rising grain prices?