Member Info for steph

Faltering consumer sentiment, low wage growth and falling house prices are compounding the impact of global factors. On Thursday, householders and property developers were warned that the country’s housing market should prepare for a downturn of a scale not seen for 30 years.

The consultancy Ernst & Young said in a report that it does not expect a crash but said falling prices and tighter credit meant a sustained period of uncertainty, which will cloud future developments and projects.

“Unlike previous downturns, interest rates look set to remain low. While we don’t envisage a crash, it has become much harder for homebuyers and developers to secure finance,” said Richard Bowman, real estate partner at EY Australia.

I never expected to see 300 without us crashing out of EU, a major recession or some similar macro event.

I still say the odds of really bad marco news that drives our SP down further is low. Maybe 30% in total for all put together (trump trade was 5%, Italy sovereign debt 5%, crash out of single market 20%, major recession within the next 2 years without any of the mentioned drivers 5%). A 70% chance of no catastrophic bad news means we should go up from here.

I also don't think there is company specific bad news that will stop us from achieving the relatively modest profits targets outlined by TEF and the analysts. TEF have indicated they hoped to significantly exceeds scribblers forecasts over 5 years with their "doubling every 5 to 6 years informal comment. Scribblers forecasts to 2020 are well short of that so lots of room to surprise on the upside as time goes on.

While 30% risk is significant it is still less likely than not, yet I think our SP pretty much has some very bad macro news priced in already.

I think our half yearly results Nov 30 will calm our TEF market by restating that the profits forecast are on track for this year and likely beyond.

I don't think there is any logical tactics to May's negotiation but basics and parliamentary arithmetic will drive some sort of last minute compromise and we will not crash out.

YEs and that is not the pre Brexit vote highs so quite a lot of bad news for the sector priced in.

Can't see why TEF should be near the bottom. We have had no company specific bad news beyond the general comments on a tougher market. No profit warnings and no decrease in profit projections. Indeed TEF's business model should make earnings less volatile than the others.

Tried to top up at 3.04 and literally ran out of money to do so. So I'll have to let my position on my spread run for now the size it is.

Love trying to top up on what I think is the absolute bottom of a dip. Bit of a cr.p shoot of course but a bit of fun as well.

Turkey not going for the jugular so that black swan not quite as large as it was this morning.

I appreciate that all things being equal a company with a small turn over, high profitability and equal earnings per share is more valuable than a company with larger turn over, medium profitability and equal earnings per share. The rate of profitability is an insurance policy against hard times. Less likely to dip into losses. Shows a sustainable business model.

However all things are not equal of course. Different sectors have different business models and within a sector there is variation as well.

TEF"s capital light, fast growth, geographically and market targeted approach is different. It may be perfectly logical to forgoe sector leading profitability to achieve sector leading growth. Berkely is in the opposite camp. Very profitable, well capitalized but slow growing.

Many of the new technology majors to this day do not make a profit and all of them for many years forwent profit to go for growth. Early investors were very well served by these strategies.

Could TEF be a mini TESLA? If TEF can double eps every 5 to 6 years for the next 15 to 18 years it sort of will be and the profitability along the way secondary to what it does when a medium sized builder. As TEF becomes bigger it can slow down its growth and go for profitability. I'm not sure it is in our interests for TEF to do that now when there is so much opportunity to expand market share.

I just don't get the current SP. Looking at the 5 year charts we have doubled EPS, dividends, assets per share and doubled any other rational measure yet our SP is lower than it was 5 years ago. TEF management credibly tell us that in 6 years they can do the same again. Broker guidance (which supposedly are 12 month guides) is at historic differentials to current SP.

If illogical maybe an arbitrage opportunity.

ON Brexit I don't think the government will do worse than they already have done so whatever happens (except crashing out) is priced in. Maybe priced in too much and we have overshot.

I expect a lot more forward visibility and certainty on pipeline and BTR partners n the Nov. 30 half yearly results.

Update was not the place. Glad to see the company spending money on sites. It has to, it is a pipeline driven business. Bigger the fundable pipeline the bigger the growth in EPS possible. My view is that fast volume growth can drive steady EPS growth if BTR volume expansion can offset tighter margins due to BTR.

https://www.standard.co.uk/comment/comment/a-fudge-on-brexit-may-be-the-only-route-forward-a3962936.html

as I mentioned yesterday meaningless fudge on the long term settlement and some compromise on the divorce and Irish border question most likely outcome and I am investing accordingly. This means in practice I'll buy what I can comfortably afford to lose short and medium term (due to volatility) on my spread at current TEF SP. I remain fully invested in my ISA.

Meaningless fudge on the long term settlement of course means years of market uncertainty for us.

yes a lot of irritating volatility ahead. Probably for years.

Oddly I think the fastest route to relative stability is a new referendum. Would take a few months but if May wins her Brexit option most everybody in Parliament (SNP and Lib dems possible not) will need to shut up and let her get on with it. If May looses and remain win that will settle it for a generation. Either way more stability than now.

Relative stability would not need to wait for the referendum itself. I'd expect the markets to settle the minute after a new referendum is certain. As above more stability than now (all are fighting like ferrets in a sack on their preferred Brexit option -and that is just the governing party).

The divorce is pretty close to sorted. Sticking point is the Irish border backstop. What both parties have insisted on is no hard border between NI and Ireland in any Brexit configurations. How to do that is difficult. The way the EU is comfortable with is a border down the Irish sea, N Ireland in the single market and customs union and no border between N and S Ireland. UK pretty comfortable with that except for DUP. Other N Ireland parties comfortable with that. As DUP prop up government their opinion oversized. I expect a fudge and DUP to go along with that.

Only a very soft Brexit (stay in single market and customs union) does not throw up the N Ireland problem. Even the Norway (semi-soft) option requires a border. The Checker's option (assuming it really is an option rather than unicorns) requires coming out of the customs union so a hard border needed.

Little agreement on what comes after exit. What is agreed is there will be a "transition period" after Brexit on March 29 of at least 20 months (and now maybe longer) when the UK is fully in both the EU single market and customs union.

What comes after that is a great unknown. Undoubtedly the most at this late stage that will be agreed before Brexit on March 29 2019 is heads of terms not detail. The wider the range of what is possible the more votes in Parliament May can gather together because each Brexit faction can have hope value their preferred Brexit is still on the table.

Parliament might just vote by a very narrow majority for a firm divorce settlement but a blind Brexit as to what comes after the transition period. I think that is still the most likely outcome and have invested (or not) accordingly.

As Gove points out heads of terms will not bind us to not put forward new options so still all to play for after Brexit when the real negotiations on our final arrangements will occur. Indeed a change of government would reset the heads of terms entirely and I'm sure the EU would accept that. The hard Brexiteers will still hope to shift to Canada plus and the soft Brexiteers to Norway. I personally cant see anything softer than Norway without a fresh referendum.

There is a scenario (20% odds) where May does not get a Parliamentary majority for a Checkers based heads of terms. IN that scenario it is also possible that May can win a non confidence vote. IN that log jam it is possible the "put Checkers to the people in a new referendum with an option to stay" would win a parliamentary majority.

Don't know what would happen. If may wins that referendum she would have the parliamentary votes to continue and quite a lot of authority to do so. If not May would probably need to resign and the issue would be settled for a generation and we can go back to making money on shares and property.

topped up and got 3.06. Put my money where my mouth was. Silly prices.

All good intelligence and I hope on the half yearly results TEF management can update, clarify and reassure on these. They also need to give JLL a good kick.

BTL seems to not give us the same long term forward visibility that the old system of pipeline and forward sales up to 3 years out gave us. Once signed it gives certainty but we have not gotten into a rhythm of signing the volume needed on a regular basis to hit long term targets. Be nice to have a long term strategic partnership with BTL investment plans that are not site specific. A 5 or 10 year investment plan. Trust they are working on that.

Might be worth tighter margins to have firm core BTL commitments for yearly investment up to 5 years out.

Buffett has said that calling top or bottom impossible. For an aim share influenced by a single medium holding coming in or out for entirely personal reasons even more impossible.

Still, bravely and foolishly I'm calling bottom on this dip. I think at this level even if the selling continues backfilling by others will kick in. The background news or the company news is not bad enough to justify this SP. As soon as there appears to be support the SP will take a modest bounce as shorters will need to close out. Lets watch the volume. It was high on Friday for no obvious reason.

I almost never there days speculate on short term SP movements but I suspect we will get a small bounce back today and this week.

March on weekend does put pressure on nutcase Brexiteers to not disrupt Mays dogs dinner but orderly Brexit. It is becoming clear that the alternative is not Canada plus but a referendum which might well reverse Brexit itself.

We only need an orderly Brexit to have a major SP correction up to 4.50 or better. Even Canada plus better than the current uncertainty. Any orderly Brexit good for us.

The update was not quite the usual "exceed forecasts" so slightly downbeat by TEF standards. Sounds like they are expecting to hit forecast more or less spot on plus or minus a bit.

If we look at total volumes during this 100pt retrace it is circa a million shares. Thus a single fund dumping half a million shares in light trading can cause such a dip - if no other fund chooses that moment to backfill.

A single fund selling half a million, even though they hurt their achieved price by keeping it up until the order filled, is a common enough occurrence and need not have anything to do with TEF. Might just be a fund pulling out of the market in general and TEF is too small a holding to game a precise price point before they fully and self harmingly execute.

Lots of reasons why a fund might pull out of the market now and go to cash. We have discussed 4 black swans that apply generally to the global and UK markets.

“ The interim dividend is proposed to increase in accordance with the anticipated full year profit growth.“ Looks like business as usual in spite of the headwinds to me

I did not read that much negativity in the brief update. Was more of a general whine on market conditions which has been the line for nearly 2 years now. Bit of A Male: "we are doing fantastically in spite of market conditions" rather than "market conditions will slow us down against projections". .

What the update did not say is that profits at any time would not meet expectations. If the update will contain this the update was the time to float that. In house divi projections still on upwards trajectory.

I think we can be confident that projecting over the next 3 years EPS will hold against the rather modest projections as they were always made with a bit of fat to cover a modest downturn. Beyond 3 years and Brexit uncertainty should be over so maybe in time to keep projections of doubling, say EPS, every 6 years on track.

Yes I expect built to rent will try to squeeze margins a bit as they play off one builder against the other in a mature market. . IN order to maintain EPS TEF will need to increase volume by a compensating amount. As volume can double every 3 to 4 years (if TEF have the funding) this is entirely reasonable. More important is that the build to rent deals keep coming rather for us to overly focus on modestly declining margins in a mature build to tent market.

nor can it go down Sunday.

Painful 5 years as well.

Absolutely no upward movement at all in 5 years (even a slight decline) in spite of ever improving EPS and dividends. The company is bigger and safer than ever with a great pipeline and intrinsic value however calculated circa 6 quid. .\

Who said life was fair?

For me I was cautious to buy above 4.20 outside my ISA. Too many black swans about (now adding Saudi retaliation on oil production to possible sanctions against Saudi). Now I am topping up well beyond my comfort zone in my spread having topped up substantially at 3.40 and now 3.12.

Even though I give the odds of a crash out of the EU 20% I believe it is only 20% and we are getting priced down as if almagaden was 90% certain. Principally I think at the last minute no matter how dire Bruit negotiations are going the deadline will get extended, maybe for along time. We can probably cancel "this" botched Brexit unilaterally before the 29th of March and start all over again. Indeed the hated ECJ is being asked for an advisory (but binding) opinion on just this option as we speak.

I think this dip to near 300 is overdone and we will stabilize and go up towards 4.00 quid after the midterms in a few weeks give the needed reassurance. Maybe a new build to rental agreement/partner will be nailed down by then.

Topped up Did not expect 300 unless we crashed out of eu Think this dip is overdone

looks scary but that is standard text and procedures.

All developments that don't meet the mayors 50% target must pas through the "Three Dragons" appraisal on affordability requirements. Few developments in London can make enough money to go-ahead without the exemption the appraisal is designed to test.

The affordable housing donation is pretty severe but has in operation for 25 years and has not stopped a build rate of 20,000 London hoes per annum or so (60,000 needed though). . Essentially the affordable element is handed over to a social provider at construction cost (often without consideration of the land cost). So a big loss of potential but hard to say is a loss in absolute terms.

I think the market overreacted to an update that was on the whole good news. I topped up a bit on my spread Friday at 3.39.

YEs there are 3 black swans about. Trump's trade wars, Brexit no deal uncertainty and Italian debt crisis all swimming about. None specifically about the sector or share. Sometimes a fund pulls out because they have jitters about the wider market and there is no connection whatsoever to TEF's update or performance. Even good news from a specific holding can be a time to sell in that scenario. I've given up thing to predict short term SP movements.

As our dividend cover hovers around 5% in spite of 2/3rds profits retention at this SP we have a floor under the SP -unless TEF stops hitting it's targets. NO sign of that yet in spite of a more challenging environment.

Personally I think Trump will cut deals after the bluster of trade war (examples: Canada Mexico). I think the UK will muddle through Brexit without jumping off a cliff. The Italians will close the gap between the 2.8% deficit requested and the 0.8% that is known to be acceptable to the ECB. 5 Star can do part of that with more military cuts that NATO hate but their base like. Italian debt at 135% of GDP is stable enough so long as budget deficits do not go much over inflation.

Of course there is a scenario where black swan 1 or 2 blows, the economy as a result shrinks and the Italian debt crisis explodes and Italian Banks go under. That would really do it to the London economy for a couple of years.

Therefore I'm invested 100% in my ISA and cautiously a bit in my spread. All in TEF. Watchful of black swans but not predicting they shall come to pass.