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Porsche,
It’s funny you say that because had I been investing in 2021 when the market was on fire, I’d have been hitting the exit at high speed back then. Not now when the share prices are on their knees.
You see in this game you have to buy somewhere near the bottom of the cycle, and sell somewhere near the top, which means buying from a pessimist, such as yourself, and selling to an optimist; which will be in the run up to the election.
I’m not sure that a mortgage guarantee scheme really helps anyone except the banks. The issue is affordability/interest rates.
Legal and General has started its own version of the previous help to buy, it’s a shared ownership scheme which I notice Crest Nicholson is now offering (not sure if other HB’s are as well?).
The buyer buys a share of the property with a mortgage, Legal and General buys the remaining share and charges the homeowner rent at 2.75% a year, which is much more affordable than a mortgage would be at around 6%, or traditional renting.
https://www.crestnicholson.com/schemes/smart-own
Strictly,
registerme2023@outlook.com
Strictly,
I’m not sure about posting my email on a PSN board after rubbishing the stock 😆
I wasn’t investing in 2008 as I had no spare money (probably just as well), but looking at balance sheets from around the time it seems there was decent equity on the bottom line, so I can only assume it was a liquidity problem of operating with mega short term debts and minimal cash, and no way of robbing Peter to pay Paul?
I note crest has learnt from this, and has a £250m credit facility in place until October 2026, together with plenty of net cash, which should navigate us out of any sh*tstorms before Rishi comes to the rescue to save his job, oops I mean the economy. I assume other housebuilders have similar arrangements in place too, so I don’t foresee another 2008 scenario.
Strictly,
I too took a small loss on PSN too. Bought in at about £13 early this year when things looked like they were picking up, and I foolishly didn’t really do any research into the fundamentals. Then I compared it with other housebuilders and sold out at £12. All things considered, I think £6.50 is fair value for PSN, and I’d consider buying back in should it reach that level.
Do you think we’re approaching 2008 times again? Personally, I don’t for a few reasons. Balance sheets are stronger, and it seems to me like it’s being caused by the BOE and government policy, and with an election coming up, there could well be a return to help to buy or something similar to win votes. I think anyone investing today will see 100% returns by 2025.
Strictly,
I think we mostly agree. There’s no doubt that Bellway produces the best results/ return on assets etc. The reason Crest Nicholson struggles to match it is economy of scale in my view and would be far better off merging with one of the bigger housebuilders. There’s no doubt it offers the best value, at 47% of net tangible assets and must therefore be a prime takeover target for one of the big players to strengthen its balance sheet?
It was only last year that Vistry bought out countryside partnerships for £1.2b, which had less than 600m of net assets at the time. Crest currently has £883m of net assets and is trading at a £414 mcap so one of the big housebuilders could pay a 50% premium on current share price, and still get the assets at a c.25% discount.
I think where we disagree is how best to value housebuilders in troubled times. PSN is priced second highest in price to book terms, only because it has previously given better returns, but based on current profit forecasts of around 350m on the c3.5m mcap, it now has a higher P/E ratio than most of the others so how can its premium be justified?
IMO it’s highly likely that PSN will eventually trade at least the same level at BWY in terms of PBV giving it a £7 share price, and even then BWY would still be better value based on P/E ratio. And that’s why it’s very risky to place too much value on past performance over book value.
Strictly,
I appreciate crest may historically have been a poor performer if you look at return on capital employed, margins etc, but I’m talking about value and the ROI for the investor if you invest today at the current SP.
With respect, your weighted book value minus 25% seems like a finger in the air valuation. How do you arrive at the 25%?
To a certain extent, margins & return on capital employed are irrelevant to the individual investor. It’s what that translates to in terms of EPS which gives the ROI for the shareholder.
So to give a fair assessment, I think it’s far better to look at the average EPS over the past 5 years expressed as a percentage of current share price.
I appreciate my method is a little unorthodox, but I hope you see where I’m coming from?
Strictly,
I’ve done some calculations on to compare all the housebuilders, and I agree that you have the best 3 housebuilder stocks.
I’ve used 3 methods of valuation and crest Nicholson comes out on top for all 3:
Basic Price to book value:
Crest: 0.47
Bellway: 0.71
Redrow: 0.76
Market cap+ total debt as a percentage of total assets:
Crest 68.4%
Bellway 83.4%
Redrow 84.2%
Average EPS over the last 5 years as a percentage of current SP:
Crest: 22.9% (avg EPS 36.48/£1.59SP)
Redrow: 16.67% (avg EPS 77.22/463.2SP)
Bellway: 15% (avg EPS 306.42/2042SP)
Please check my figures and do your own research.
Porsche,
Many stocks (including PSN) are already below covid so you may want to reconsider how much further shares have to fall.
I tend to agree that psn will continue falling though as the SP is propped up by prior “superior” earnings over other HB’s rather than strength in balance sheet.
It will be interesting to see if it can still produce superior earnings in these challenging times. If not, then yes the SP could well halve.
It was good while it lasted.
How can this be down 8% on no news?
It’s now trading at 50% of tangible book value. Absolutely crazy valuation. Must be a take over target for one of the bigger housebuilders?
How can housebuilders be down today? Absolutely absurd!!
It’s the first hold in nearly 2 years for god sake!!!
Https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/july2023
Https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/july2023
Https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/july2023
As I predicted, Crest Nicholson is seeing the biggest recovery today. Still trading at just over half tangible book value. Last day to get in before it goes ex dividend tomorrow.
Well, the buys are now more than double the sells, and yet its 4.3% down, so I’m convinced the whole pricing is manipulated by the big boys.
No real concern for me though because I bought my shares exactly have tangible book value and am in it for the long haul….
It’s trading at around 4x it’s book price excl goodwill.
Strictly,
You’re probably the most knowledgeable person on this board, so I’m going to hijack the thread and ask you a question unrelated to PSN.
Crest is down over 3% today, but if we look at the stats, there has been almost twice as many buys as sells. How can this happen??
The same thing happened in July, 2 days before inflation data it dropped by a similar amount, allowing the institutions to buy in cheap, and then it shot up 21% in 2 days.
Vol. Sold 59,127
Sold Value £107.45k
Vol. Bought 108,182
Bought Value £196.69k
I find the arrogance of many posters on here (thinking they are Warren buffet) very amusing.
“I buy when others are fearful” “As a smart investor, buy when the AVERAGE JOES are having a panic attack”
Smart investors don’t buy companies that has a book value made up almost entirely of goodwill, aka nothing.
And then of course you have he experts predicting a 20% rise on this negative outlook 😂