Member Info for strictlybricks

Razor,

I agree with your assessment of both Redrow and Bellway....

However, if you took an updated price to book value on each as at close of play on 26th based on BVPS for Bellway of 2,104p and for Redrow of 416p (these were my calculated estimates for end July), then Redrow was about 6% cheaper than Bellway that day.

Both still well cheap, IMO, though, and both very much on my radar - though currently, of these two, I only hold Redrow at the moment (as the name perhaps implies, I move around between the different builders' shares of the ones that I perceive to be the better value.... which isn't all of them - every sector has its woofers, doesn't it..?)

Strictly

Or, as the late Jack Bruce sang...

"I support the left, though I'm leaning to the right"

I imagine there are plenty of old gits on here who are long enough in the tooth to remember Cream..?

Cov, I'm not entirely confident that you and Steph will ever reach agreement when it comes to politics...?

Me - I'm keeping shtum on that front...! :-)

Strictly

Dako,

Schoolboy error alert.... I omitted to add "4" after the words "...and priced at a PBV of around" on the first line...

Hopefully that makes sense now..? :-)

Strictly

Dako,

You can go back much further than that....

Share price around 430p in 2007, i.e. eleven years ago, and priced at a PBV of around - which is a record for any builder, ever, that I've got figures on and, in some cases, these go back as far as the early '80's..!

If you're a glass half full wallah, there's reason for gloom I guess, but if you're a glass half empty sort of person, and are taking into account that all Telford have been doing since 2007 is making money not losing it, well - what does that suggest about their value today..?

Strictly

Terrace,

From the trading update:
...........................................................................................................................

"The Group expects to report strong pre-exceptional full year results...."
............................................................................................................................

Ah yes, those two magic words "pre-exceptional"

Anyone who had spent even a modest amount of time looking back over Galliford's past results, comparing stated EPS against reality check EPS (by which I mean, using BVPS at beginning and end of year adjusted for dividends paid) for the years 2012 to 2017, would probably, like me, conclude that pre-exceptional earnings are, indeed, truly a thing of wonder... :-)

Strictly

PS

In respect of my post below just now, I must remember that there are restrictions in the use of some language on this website....!

In case anyone was wondering, the word in the previous post "starred out" began with a B.

Strictly

James,

I agree with what you've said...

I'd had them in for 64p EPS and BVPS at year end of 364p, but they've suggested BVPS of 365p so that probably makes the EPS around 65p - which is bang on what the scribblers have them down for, so fair do's to them..!

However, this does still give an ROE of 19.4%, down from 21.1%.

Not that I see an issue with that.... history suggests that 20% plus profitability for builders can't last forever, and in my own forward projections I'm allowing for all the builders' ROEs to drift gently downwards over the coming years.

For me, though, Barratt is around 30% overpriced relative to some other builders as, although its current PBV is similar to that of Bellway, in the latter company we are talking about an impressive long term track record (I mean, going back thirty years plus) compared to the very chequered past that is Barratt's.

In recent years, Barratt has under-performed Bellway in profitability by 3% to 4% - so no change there, it seems..?

And, annoyingly, Barratt are still caught up in this "Me too" game with Persimmon, describing their dividend policy as a "Capital return policy".

*******s - they're paying 40% of earnings as dividend, for goodness sake - it's no big deal, and certainly less than Crest, whose shares can be purchased at a big discount to Barratt's on whatever measure you use.

All just IMO, of course.. ! :-)

Strictly

Cov,

If you let go of any market concern and pretend, just for a moment, that Telford didn't have a listing (so Mr Market couldn't put his oar in), it might help to remember that, 12 years ago, Telford's BVPS was less than a third of what it is now yet the price was 430p.

Stay focused on the numbers, I always think, and bo..ocks to Mr Market!

So, the short story is - yes, I agree with you....

Strictly

Razor,

Have a look at the TEF share chat.... plenty to consider on there including, from time to time, discussion that includes Redrow and Bellway.

Strictly

Khyber,

Well, I don't know if you're referring to me amongst others - as I certainly don't consider myself to be a sage - but I can say that, for me, Countryside doesn't get on the starting line for more than a thirty second butcher's as its PBV is over 2.0 and, straight off, that's rather expensive for me, Gungha Din, in the light of perceived significantly better value elsewhere in the sector....

If that was looking attractive then I might have been tempted to put some legwork into checking it out properly.... this occurred with Inland when an investing pal of mine flagged it up in a similar manner to what you've just done and, having spent a few hours on, it I ended up making it my second largest holding.

In that instance, I'd been previously put off by its two years of outstanding EPS followed by EPS then halving....

I hadn't previously looked any further than that to discover that the two years' extras were entirely about one off property revaluations and that, actually, the underlying business was storming ahead...

So that was down to my pal - who reads this chat, so he knows who I mean - so thanks for that, mate!

But the Countryside PBV is way beyond that of the likes of BWY, CRST, INL, RDW and TEF - which is very much where my current interests lie....

Anyway, sorry if this seems a bit negative, but hope it helps..?

Strictly

Well, LSE appears to have come back from the dead, then...?

It occurred to me, as a cautious soul whom is very keen on plan Bs, that perhaps there could be a nominated plan B for this share chat...?

After all, while my experience of these things in limited, the Telford chat does seem to me to be pretty exceptional in it's overall calibre when compared to some of the other house builder share chats on this site, no names, no pack drill, and if LSE did suddenly call it a day and expire on us, we'd perhaps be like kids separated from their parents - as is topical elsewhere at the moment.

I appreciate that I, and some of the others here, also have the blog, where all this sort of stuff gets discussed in more depth, but not all of you are on it.

And the more we use the TEF chat to broaden out the discussion to include other builders well, speaking personally, the more interesting I find it.

So, if what I'm suggesting has any traction, perhaps one of the longer serving, more frequently contributing, aficionados here would like to nominate another chat site that we could turn to in the event of requiring to implement plan B...?

And, moving on, I have some more I'm intending to write here about long term interest rates, Cyber, as, re-reading your comment from the other day, I realise I haven't responded fully to it....

I blame the pub.

Strictly

Rightly or wrongly, I'm sensing a whiff of concern on here at the moment...?

Cyber has referenced me in respect of .tracking historical PE values when in fact what I pay attention to, for a number of reasons, are PBVs going right back.

Wilson Bowden showed the way on this to me - they were a great builder who unfortunately were taken out of the market by Barratt who nearly died as a result, but never mind that...

From around 1993 to 1995, their PBV fluctuated wildly between about 2.3 and 1.1. Their share price halved, doubled, and halved again during that time to then recover again though not quite as sharply this time.

And all poor old Wilson Bowden did during that time was to carry on making money - albeit at a rate that was temporarily lower than their usual excellent average (which long term was around 20% ROE).

Bellway's long term average ROE has been around 16%, and their long term comfortable PBV range has been between 1.4 and 1.6.

If I could somehow put my graphs on here I'm sure you could all see that quite clearly.

As of close of play tonight, I have Bellway on exactly 1.5 PBV - i.e. bang in the middle of their market price comfort zone.

So, how is that controversial..?

And Bellway, for a number of reasons, is my benchmark share - so one thing is that I can judge others against it.

And, right now IMO, Crest is cheaper than Bellway to a double digit degree - which is why I'm holding a shed-load of Crest and no Bellway, even though I really like Bellway as a share to the extent that I've told family members (for whom I'm looking after their investments) that if anything untoward happens to me suddenly then just bung a big chunk into Bellway and leave it there...!

Of course, I'm hoping that won't happen and also I'm not trying to tell any of you lot where to invest - DYOR, and all that fine stuff...

I'm rambling a bit with this, but what I'm trying to say is that I have three personal rules for investment, and the third, and most important of these, is "Don't be flakey!"

Because, if you are, you're probably better off not being in this game in the first place.

And part of not being flakey is not letting that nutter, Mr Market, influence your investment decisions other than to take advantage of his manic behaviour.

As I recall, Warren Buffett reckons this is the most important lesson he learned from his mentor, Ben Graham, and, let's face it, it has stood him pretty well, hasn't it..?

So it's all sliding a bit right now, but so what?

Strictly

Terrace, Berkeley isn't a share I follow but, as you've raised it, I just had a quick skim of the comments in the final results and what Mr Pidgeley seems to be saying is that he has now run out of the bargain basement plots he opportunised on post crunch - having called that particular cycle last time round rather well, it seems.. Well, the market might have given him a cuff round the ear today but that cheap land wasn't going to last forever, was it..? Probably what's foremost in his mind is completing the capital repayment programme - due to finish in 2021. As I recall (but I may be wrong?), he's in for an eye-watering bonus on that if it comes off - unlike the last one which was snuffed out by the credit crunch.. Remember all the fuss about the Persimmon boys getting their's recently - they were only copying Pidgeley, after all, so it wasn't an original thought from Persimmon. BTW, the reason I'm not a fan of owning Berkeley shares isn't that they're not a good company as I'm sure they are - but a simple soul like me finds monitoring the share buy backs and all that too much effort when there are alternative good prospects that operate more straighforwardly... Strictly

James, It's nothing to do with LSE Premium, it's that you can't get on there except via an invite sent from the blog.... Which I've now done, together with a separate explanatory email - so please email me back to confirm received then I know I've got your email address right. Strictly

Sonneteer, You're welcome...! You've probably noticed I've referred on here about a separate blog from time to time..... Cyber, Sain and Terrace are also on there though I haven't been able to encourage Steph to join thus far.... :-( The blog is also named Strictly Bricks and, funnily enough, is specifically all about investing in house builders' shares and goes into significant detail from time to time about these and occasionally on related issues. If it interests you to have a look, you'd need to let me have an email address (even if it's just a temporary one to put on here for that purpose) and I can send you a blog invite - it's a private blog so you need the invite to get into it. Strictly

To put some numbers on the overall discussion we've been having here (and I appreciate I may be stating the bleedin' obvious, but anyway...), as follows: If turnover starts at £1,000 and gross profit is £200, then gross margin is 20%... Increase sales by 15% a year and gross profit (and also EPS) by 10% a year, and in five years' time, sales are £2,011 and gross profit is £322. That's a gross margin now reduced to 16%. This doesn't effect return on equity based on ROE being 15% and paying a third in dividend, as the book value per share, like the earnings per share, is increasing at 10% a year still. So, based on the above, all the numbers seem entirely consistent with what we've been guided by Telford, and would seem to allow for increasing turnover at a greater rate than would likely be the case for another builder in an equivalent situation due to the intended increasing percentage of BTR in coming years for Telford - which the other builders don't have. So what I guess I'm saying is that there doesn't necessarily have to be any issue with the differing numbers being bandied around here, even if, at first glance, there seems to be...? I imagine you did all well understand that anyway, but just in case you didn't..... :-) Strictly

Terrace, No, I've got 56p and 62p EPS for 2019 and 2020, and then rising 10% a year from there.... So, allowing for a third paid out in div, that would make year five, 2023, 82.52p EPS and 536.66p BVPS. These figures I'm using are different not because I think I'm smarter than the scribblersbut because they make sense to me in the light of Telford's declared 15% to 18% sales growth a year and taking into account their awesome BVPS growth since the start... So, de-risking through BTR, and all that, would have to seriously scupper that track record in order to only meet the scribblers' estimates, and I have more faith in Mathew 7. 16. than that..! Strictly

Terrace/Cyber, Putting aside the relative merits of the de-risking approaches of the different builders, it all boils down to a single number in the end... Which is the return on equity. I'm allowing for TEF's ROE to hold fairly steady from here (which seems more or less in line with the scribblers), and that of the other house builders in the frame to gently decline, over the next six to eight years to end up in similar territory as Telford by then, and, on that basis, Telford are currently a tad more expensive than the others right now. However, if Bellway, Redrow, et al continue to maintain 20% plus ROE they currently enjoy and Telford continue as above, well, that does open up the value gap somewhat.... As I said, though, this is notwithstanding respective de-risking strategies - which IMO are hard, if not impossible, to put a price on...? Strictly

James, I thought that was an interesting observation you made about the lack of a big JV deal for Telford - one that hadn't been on my radar, that's for sure....! And also one I don't really have a view on, so I suppose I'm making this comment to keep your note in the frame and so that maybe one or two others here, who have a much more informed perspective on Telford than me, might comment on further....? Strictly

Terrace, The EPS numbers I have penciled in for Crest are 65p 2018, 71p 2019 and 76p 2020 which is slightly lower than the scribblers have. This as compared to the other house builders in the frame where, in every case, my numbers are higher than those of the scribblers. So, if anything and based on the above, I'm perhaps being a tad cautious on Crest...? After 2020, I've allowed for an annual increase in EPS of 5% for Crest compared with 8% for Bellway, 11% Inland, 8% Redrow and 10% Telford. In all likelihood, those above figures will be well wrong overall, but it's the relative positions that are important for me seeing as I'm very likely to remain fully invested through whatever s..t storm comes our way at some point... As no doubt it will..! And, despite all the above but based on the above, Crest remain best value against the others barring Inland (just that I'm wussy about venturing in too far there beyond what I'm already now holding given the modest size of that business). So Crest is currently my largest holding, and I'm happy to be there despite what the market thinks at the moment. Strictly