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Nige, 100% agree, there will be a recession and it could be a bad one. I understand the Boris was actually opposed to "austerity" during the last recession, and some economists believe that spending should have been increased to get out of the recession sooner; we'll see if Boris follows this policy, or if he can even afford to so with the amount already borrowed this year to deal with covid19.
What i do know, TW's land purchase hurdles were based on site being able to take a 20% drop in revenue and upto 30% drop in sales rates and still recover the land cost and cover overheads. A far better position than the previous recession when sites were all running at a loss and potentially still able to pay a dividend and retain a FTSE100 ranking!?
Personally, i believe that the market has already priced in BREXIT and a potential recession on TW and the other builders. I think at under £1.60 its a good long term buy, but i do think we'll likely be up and down between the £1.40 mark and possibly the £1.60-£1.70 mark for the next 6-12 mths...
RICS housing price monitor is an interesting one... but the reality is that very few completions were made in the May period on any property due to the inability for people to move home, or at least the un-willingness of people to move. I would therefore suggest that Mays data is skewed as only those desperate to move / sell completed on sales and potentially took hits on price to do so. That being said, the vast majority of 95% mortgages have been pulled from the market and only a couple of lenders with 90% products available. This is a sure sign that the banks feel there will be a house price correction of upto 10%. HOWEVER, banks tend to be less risky since the 2007 lending hype, and as we are all aware there is a housing stock shortage, so i dont think that a 10% drop will actually materialise... tho i do think we have to realistically expect a drop... more than likely 5% in the short term?
So after selling out most my stake on the way down, and kicking myself at not buying back in at £1.40, i've managed to get back in at £1.50147 this morning... hoping the last couple of days is the result of some quick profit taking from those that entered sub-£1.40 mark and that these will back back to £1.60+ in the near future...
TW have been up and down between 180 and 210 all of 2017-2020... with a couple of blips around the brexit vote and the last election. They are in great shape, a cash generating machine and will be a good investment for the future im sure. I sold out half my holdings when they were on the way down (at the 160) mark another 1/4 when they canceled the divi. Wish i had bought back in at the £1.40 mark rather than buying EPIC shares for their dividend now! Hindsight is a wonderful thing...
Still holding some cash so if they drop below the £1.60 mark i'll be buying some more... Long term, they will be back to the £1.80-£2.00 mark without a doubt
Dobbers, its a totally differant company from either Taylor Woodrow or George Wimpey were... I definately noticed in the last two years that i was there that Refern and the main board were getting more and more cautious. Sat with Pete Redfern at Rugby match in that timeframe and he talked about managing RISK and the Cyclical nature of house building. Looking back now it is obvious that they had begun prepping the business for an oncomming recession either from BREXIT or somewhere else!
I doubt that a divi will be here this financial year now. Having worked at TW from '99 through to '19 and met Pete Redfern a number of times over the years, he is more cautious than he comes across and also has a good understanding of public image and acceptability.
Additional, TW shut sites for two months... that doesnt transfer to two months of completions lost, it translate more likely to 3mths; as it takes time to get started again from a standstill; additionally with the extra H&S steps in place, build rates will be slower, how much slower is an unknow at the min. though it may translate to better build quality and therefore a saving on customer care costs in the long run.
On that basis, whilst TW is a cash rich business, i think they'll be more likely to hold back on a dividend this year and use that as a positive PR exercise whilst maintaining a stronger than historical average cash bank.
TW and most the big house builders dont typically do anything directly with / for the Govt. Housing schemes are normally paid for by Housing Associations. Typically, but not always, the HA will pay say TW a "golden brick" payment for the land and infrastructure; as Nige_W said, it still is typically 25% of the contract value; then staged payments per plot on a monthly basis.
You have to remember, House Building is differant than Construction... as much as people in the box bashing world might like to think otherwise... and as much as other industries look at it. House Builders tend to be speculative developers so take the risk and profit... In Construction, margins are lower, but so are the risks...
Is it me or does this stock seem to be taking more of a knock than most? Down 37% on its pre covid-19 low... still paying dividends at £0.0033 giving it roughly 8% yield at 50p/share. Latest dividend declaration is 75% or renters are still paying, which is enough to cover the current dividend payments. Ok NAV is up in the air, but even if you said there was a 20% drop in NAV, that would put the NAV at around £0.80/share... Surely this should be at the 60p/share mark?