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JG, but the thing driving this lower was inflation. Now inflation has changed direction, this SP

should too. FGP is up about 30-40% in the last few weeks, CCL has doubled. Watch this space.

Not surprised at this price. Best value house builder share.

Avocet,

Everyone is entitled to their own view. There’s no need to start calling people “what they are”. Psn was my only HB investment due to it suffering the biggest fall, but then I started doing a bit more research, comparing it to other HB’s, particularly the strength of balance sheet and I identified PSN is the most overvalued in terms of PBV, and crest is the most undervalued, so I moved my holding there instead.

So when I started chatting with the knowledgeable posters on this board (special thanks to strictlybricks for his insights) I was invested here.

PSN is a strong company, and I would invest again if it’s price aligns with other HB’s in terms of PBV, or the next results can justify paying the premium.

So for now PSN is still on my watchlist, and I’m interested in the general HB chat on this board that may affect my crest holding, so like it or not, I’ll be sticking around.

Yet again, PSN is the only HB in the red today.

The writing is on the wall folks.

JG, it’s up 12% in the last 2 weeks. Results should follow FGP, inflation is coming down. If you expect us to only go up in a straight line then stocks in general are probably not for you.

Avocet, this board seems to be the one stop shop for general HB chat. No point repeating the same on other HB boards.

Strictly,

Your posts on here are invaluable. That explains why psn was trading at a massive premium to other HB’s and has now fallen more than the others. I think it’s safe to assume there’ll be no repeat of that pushing the SP back to where it was.

I personally won’t be touching psn with a barge pole unless it comes to within 10-20% of the PBV of crest. I know you say previous ROE was better etc, but still can’t justify paying 110% of book here vs 60% at crest. All HB’s should be capable of producing a similar ROE as we enter this new, more normalised, chapter of interest rates, they all operate in the same market conditions. The only difference is how the each BOD decide to take their respective business forward in terms of target market, size of property, quality of finish etc.

Dean finch has had an easy ride in the results produced so far with the hot market. It will be interesting to see which HB adapts to this new economic climate best. But for me Crest offers the best value so that’s where my money is. It seems the market agrees because that has outperformed all the others, finishing 3% up today, about 12% up yesterday, yet is still paying catch up to get where it was a few weeks ago.

Strictly,

You do seem very knowledgeable and I agree with most of what you write.

Where we differ in opinion is how much value to place on previous profitability vs strength of balance sheet.

All housebuilders have a simple business model that can adapt with a change of target market/ new BOD etc. My worry with placing too much value in previous returns, particularly in difficult times is that “goodwill” baked in to the SP can soon be lost in a bad year whereas a strong balance sheet, not so much.

Forgive me, I may be wrong here as I haven’t done so much digging into psn but I believe a different BOD was in when these results were coming through (Jeff somebody and dean finch?)

Without wanting to run the risk of a defamation claim, there are plenty of press articles relating to the quality of PSN houses. This probably explains the better profit per plot. Once improved, will they be able to maintain a superior ROE?

https://www.thesun.co.uk/money/20664332/residents-newbuild-nightmare-persimmon-homes/amp/

https://www.bbc.co.uk/news/business-50827576.amp

https://www.stratford-herald.com/news/amp/families-demand-fix-for-shoddy-new-homes-9238538/

Strictly,

You make very valid points, but part of the reason PSN has delivered a superior ROE was help to buy which of course is now over. Another reason is the quality of their homes, particularly the fittings. I don’t want to slander them on here, but if you go in one, or have a look at many of the “internet snagger” videos you’ll see what I mean. I know they’ve been under pressure to improve, which will increase costs/decrease ROE.

Then you have to look at target market. The typical psn buyer is most squeezed by the cost of living crisis. Many are FTB’s too who are struggling to get low deposit mortgages at the mo. Crest is aimed at home movers with bigger deposits, who aren’t impacted as much by higher rates.

We’re in very different times now so I think we can only really value HB’s by PBV. if we place value in previous profits/returns and they don’t materialise, investors will take quite a haircut. Crests strong balance sheet is going nowhere.

Bottom line for me is crest is trading at about 60% of book, Psn is about 110% and I just can’t justify the extra cost.

Strictly, The p/e for crest is 6.16 vs 6.88 for PSN.

You do talk some sh*te Steve.

Strictly,

Very informative post. My view is that CRST carries far less risk than PSN because it’s trading at such a discount to its book value. There is every chance PSN will cut the divi and the SP will tumble. There’s also every chance that inflation will see their costs increased/ROE decreased.

CRST divi has already been announced so no surprises to be had there. Being a smaller HB, with an mcap of c.500m CRST has more potential to expand/grow too.

Bottom line is that unless PSN can continue to provide a superior ROE in these market conditions, it’s SP will fall dramatically. CRST won’t.

Steve,

My question is why wouldn’t this drop to £6 a share? That would put in line with CRST in terms of price to book. You can’t value HB’s on profitability/divi when it’s not going to be what it was pre 2022.

I’m cautious on HB’s, but CRST is the one to have.

I have a bit of skin in the game, but not with PSN. CRST is far better value, current trading at about 0.6x book value, and still about 20% down for where it was a few weeks back.

I think this share has turned a corner now. Inflation coming down, we have the results next week which, if FGP is anything to go by, should boost the SP further too.

There’ll be no goodwill knocked off these results either.

Steve, I really don’t know where to start with that comment. Most people are on fixed rates, so they don’t want to lose it but buying a new build. When these fixed rates end, forced sales will flood the market and HB’s will struggle to compete.

It seems the market has baked in similar inflation figures to the US.

Better hope it materialises.

8% would be disastrous for UK markets when the US is 3%. It would show we have a real problem.

Think some more pain to come on Wednesday when the inflation data comes out.