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Strictly...I confess that I do not begin to understand the PBV weightings you assess for each homebuilder but I have a hunch that it is objective rather than mathematically assessed.However,how you can arrive at the conclusion that TEF was expensive last week at 270p/share compared with their peers is way beyond my comprehension.IPRS work is capable of ROCE of infinite magnitude and there is no difference operationally between that and private sales apart from when and how much they get paid.Nobody can fault your long term investment returns though.....IPRS is a massive derisking manoeuvre.
Terrace (et al):
"With a current NAV of 330p per share and PBT guided to be a total of £95m over the coming three years,why on earth is the present SP below the value of the company's assets?"
I can't pretend to know the mind of the market, but with the adjustments to EPS and ROE that I put into my spreadsheet going forwards (and without going into all the ins and outs of a duck's whatsit here on that...), the alterations due to the trading update took my estimated BVPS 2026 down from 615p to 480p.
That's a 22% drop which, by coincidence (happy or otherwise), is also close to the initial market price drop.
So I imagine the market drop was about perceived change in long term value rather than taking a direct view on what BVPS is now - but then, what do I know..?
I am also now allowing for the uncertainty about the nature of the market Telford are going full steam ahead towards...?
I think I understand something about the overall house builder market well enough.... long term, the sensible builders average about a 15% ROE, which I'm happy with.
But let's be fair, this is all a relatively new and unfolding game for TEF, and, like Brexit, we don't really know how it's going to unfold.
But we do know, with the nod about this year's and next year's figures, that's now six years in succession of disappointment (certainly in comparison to Bellway and Redrow - who are both obviously normal house builders)
Anyway - who will be holding the whip hand in these build to rent partnerships, for a start..?
It's one thing taking 10% non-returnable deposits off owner occupiers and individual buy-to-letters, but TEF are now swimming with big boys as customers...
This might end up being a single digit ROE game for them...?
We don't havespecific about that, do we, and, frankly, I'm only prepared to base my investing decisions on a combination of direct company guidance, track record and common sense rather than what the scribblers might have to say (I thought "Exdividend" nailed that one on the head rather well in his comment here Monday lunchtime).
The upshot for me is that I reduced Telford's book value weighting from 60% to 20%, i.e. 160% against Bovis 100% to 120% against Bovis 100%, a drop of 25%.
That was probably a bit harsh, but I built in some margin of error for the unknown.
Other things being equal, a 30% weighting probably would have been about right... however, given the price rise since, that still now makes Telford too expensive for me against the others so, if I hadn't sold last week then I'd no doubt have done so today.
And, as a relentless follower of value, there's no point in having any angst or regret about not waiting a few days.... that's trying to call the short term market movements - the road to ruin in my view...!
When the private market is "on fire" again,the renewed output in this area will be in addition to full steam ahead IPRS work,not instead of.
Cyber....Institutions are the future as far as landlords are concerned and at the moment they seem to have a huge appetite for the yields they can get.There is a lot of old,unmodernised flats under rent in London which often let within a couple of days of being offered.Occupancy rates for new flats in good locations in terms of amenities,facilities,transport links,bars,restaurants,cinemas,retail etc will remain high.
there not their
>So their is no reason that they should not be successful,provided that contract hurdle costs are right.
It's the rental side of things that may take time to evaluate. There are no guarantees from Invesco & M&G by the sounds of it so if they don't get the return they are hoping for from rental income then they just decline the offer for new developments from TEF.
If TEF switch back from BTR to open market then they will switch from profits accounted for every year to profits accounted for after 3 years. The market won't like that I don't think. It will be another profit warning.
The site production costs of private sale and IPRS units must be pretty much identical and the BOD have their heads around that OK.IPRS is a bit like selling private sale units off plan before works start on site with the buyer making monthly payments until completion.Perhaps IPRS will yield about £25k per unit less on average but their are savings on finance and selling costs.So their is no reason that they should not be successful,provided that contract hurdle costs are right.They are missing previous guidance because of private sale difficulty issues,in the main, which don't affect IPRS work.
Perhaps after missing guidance for 2019 and 2020 guidance reduced by about 50% the market is concerned about them missing current guidance?.Being able to maintain the dividend even?
Low anticipated ROE for the next couple of years and a transition into BTR is a jump into the unknown.
Hopefully the SP moves on anticipation of the BTR story being a success but it will be a good while before that can be evaluated.
With a current NAV of 330p per share and PBT guided to be a total of £95m over the coming three years,why on earth is the present SP below the value of the company's assets?.
I should imagine since last Summer they have been progressing a number of acquistions deemed suitable for the new BTR vehicle
Yesterday's news was particularly pleasing as they have not one but 2 hungry mouths to feed .They have templated an agreement so I guess that makes the task a little easier of forecasting revenue/profit.for individual projects
TEF must have been impressed with Invesco's ambitions in BTR having allocated £400m last summer to fund Ecoworld's 2 sites at Kew and Barking totalling 1,000 homes.
Hopefully this calendar year the new partnership will have identifed something suitable where an individual site might have a total development value of £150-£250m
I should imagine we have a series of RNS to look forward to
They really have arrived at the top table I should imagine Savills will have some very tasty sites to offer
What is important is that both M &G/ TEF's Carmen Street and Upton Park developments which both physically complete this year let well and achieve a high level of occupancy to sustain the appetite
It would be interesting to find out what their expectations are to meet appraisal targets average I am guessing an average occupancy rate of 80-85% ? By the end of the year they should soon reveal whether they will be a success or not
The burning question is given a similar rent profile and location would a tenant prefer an apartment in a private multi -occupancy block with different ownerships or pay slightly more for one dedicated to letting with more communal facilities I really don't know the answer to that question.We shall soon find out
It is a fast moving market
"it is fair to say that BTR units completed during 2017 generally tend to be more expensive to rent than those completed in 2016, but let-up rates suggest that there is demand across the rental spectrum.
Looking ahead, 2018 should yield another crop of distinctive BTR developments - Realstar’s flagship development at Elephant and Castle completed in January and is a good first example."
What looks to be an ideal site for TEF would be one that yields up 250 BTR units,200 affordable and 90 private which comes into the equation as TEF's bunce !!
Planning delays will still be an issue Moilior again in their latest report
"Across London planning applications have been falling since 2014 - at the current rate 40% fewer units will be applied for in 2018 compared to 2014.
During 2017 and 2018 so far it has taken 13 months on average to gain full consent, longer than at any time since the 2009 recession."