LIBERUM: UK Small & Mid Cap Dispatches
Thoughts ahead of the vote, Podcast - AB Dynamics, Video: Housebuilders - What to talk about after the election, Balfour Beatty, SThree, CareTech, Costain, Just Eat, Serco, Fuller, Smith & Turner, Superdry, The ...
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12 Dec 19
LIBERUM: Morning Comment
Thoughts ahead of the vote, Podcast - AB Dynamics, Video: Housebuilders - What to talk about after the election, Ashtead, Balfour Beatty, SThree, CareTech, Costain, Nestle, Just Eat, Serco, Fuller, Smith & Turner, Superdry, The...
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12 Dec 19
LIBERUM: UK Housebuilders - What to talk about after the election
If the most likely outcome to the upcoming election is delivered, we would expect housebuilding shares to continue performing as sentiment improves and the housing market could benefit from reduced politico-economic uncertainty. Prices have more scope to increase in the north, while recovery in the south is more likely to benefit volumes.
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05 Dec 19
LIBERUM: Crest Nicholson* - Resetting to reposition
We put our recommendation, target price and estimates under review on Crest Nicholson’s update last week. Having had time to reflect, we re-establish coverage with a target price of 379p, which gives 10% TSR upside, making the shares a Buy on our rating system.
06 Nov 19
LIBERUM: UK Housebuilders - Election may slow housing market but boost builders’ shares
If history is a guide we should expect the housing market to slow in the run-up to the announced general election, but if the opinion polls and bookmakers are correct, the housebuilders shares could outperform if a Conservative victory is the outcome. The housing market slowed in five of the last six elections, although these were all in the summer, and this may not translate to a winter election.
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30 Oct 19
Cenkos: Building & Construction
Due to a change in Analyst role, Cenkos Securities plc has suspended coverage of the following stocks (see table 1). Our previous recommendation and forecasts can no longer be relied upon.
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31 Jul 19
UK Housebuilding Sector in 2Q 2019
Dwight Barkley PhD is a Professor of Mathematics at the University of Warwick. He studies waves in excitable media such as the Belousov-Zhabotinsky reaction, heart tissue and neurons. In 1997, Dr Barkley and Dr Laurette Tuckerman, a Paris-based mathematical physicist, developed ‘bifurcation analysis for time steppers’, which is a technique for modifying computer codes to perform bifurcation analysis. More lyrical, perhaps, Dwight is also known for formulating an equation to estimate how long it will be until a child in a car asks the question “are we there yet?” And, it is shown on the image on page 3 of this report. Herein, there are three factors which decide the timing of this wearisome question i.e. one plus the number of activities, divided by the number of children in the car squared. That figure is then added to the time it took the family to get into the car and set off on its journey. Crucial in putting off the first query as to the proximity of the destination are onboard activities for children i.e. no activities equals a question before leaving the driveway. Dr Barkley says: “Mathematics can help answer many of life’s questions”. If only the Brexit journey were that simple. It is not. We are all children now stuck in the back seat; and, maybe, we are still on the driveway with a dearth of on-board activities. Yes, three years on Brexit-resolution-fatigue is making itself felt across the board, including the UK Housebuilding Sector, where the fall in value in 2Q’19 was 7%. Berkeley said something similarin its final results, on 20 June, when it lamented an uncertain operating environment and “a lack of visibility in the political outlook”; and its PBT is expected to fall by a further third this fiscal year. The daily Sector value chart is also lurching from top-left to bottom-right (as is the British Pound versus the Euro). Yes, there were two palpable positives in 2Q from the NHBC and UK Finance about building activity and mortgages; plus, on the third day of 3Q, CBRE’s bid for Telford Homes. Nonetheless, prospective earnings growth for the Sector is now flat in both 2019 and 2020. This is about the journey.
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05 Jul 19
Getting there, but slowly
While we like where Crest Nicholson looks to be heading (towards a broader tenure base) this is still something of a wait-and-see. The new CEO still does not arrive for three months and while we feel Peter Truscott will continue, if not accelerate, the current strategic shift, we still do not know the size, shape or flavour of the new Crest. If the destination is as hoped, we believe that fair value could be reset at c.450p and the recommendation moved to positive. The brave may want to take a leap of faith now, but we prefer to wait. That said, we already view Crest in a more favourable light than the sector’s large caps. HOLD.
18 Jun 19
LIBERUM: Crest Nicholson* - Strategy delivering
Crest Nicholson is starting to see the fruits of its revised strategy more quickly than we or management originally expected. By broadening the offer of houses to private rent and social intermediate sale it has achieved a 7% increase in H1 revenues and reduced debt year-on-year.
11 Jun 19
LIBERUM: Crest Nicholson* - Resilient trading
Crest Nicholson has announced that trading has been resilient in the six months to April 2019, with a reservation rate of 0.78 units per site per week, which is the same as achieved a year ago. The statement also shows that management has delivered on the strategy of turning land assets more quickly, which is demonstrated by a £41m reduction in net debt compared to last year as well as an acceleration in revenues from land sales, JV and commercial activity.
15 May 19
UK Housebuilding Sector in 1Q 2019
Y2K is a numeronym and was the common abbreviation for the year 2000 software problem; and, for the benefit of millennial readers, the abbreviation combines the letter ‘Y’ for year and ‘K’ for the SI unit prefix kilo, meaning 1000. Hence, 2K signifies 2000.
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09 Apr 19
LIBERUM: Crest Nicholson* - New CEO and trading on track
Crest Nicholson is the most shorted of the UK housebuilders, but we expect a reconsideration on news that trading remains resilient, with estimates unchanged, and that the Board has recruited Peter Truscott (from Galliford Try) as new CEO. He is an extremely experienced housebuilder and should prove instrumental in delivering Crest Nicholson’s aim to deliver operational efficiencies and diversify exposures by selling price and tenure and deliver.
26 Mar 19
LIBERUM: UK Housebuilders - Moving to a more balanced stance
After a 20%+ bounce in the shares from December lows, we find that the risk / reward has become less favourable. We estimated that the worst case of a hard Brexit had been discounted in December, but we no longer think this is the case.
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11 Feb 19
LIBERUM: Crest Nicholson* - Short-term safety, medium-term potential
The short term outlook has been de-risked as management focuses on cash flow to pay a high dividend and generate a surplus. In the medium term, we expect restored profit momentum, driven by repositioning (by price-point and tenure), lower land and build costs, and incremental profits from JVs.
04 Feb 19
LIBERUM: Crest Nicholson* - New strategy taking shape
Crest Nicholson’s results were broadly as expected, with PBT down 15% to £176m, mainly due to margin pressure as markets in London and the Home Counties saw limited selling price inflation and 3% build cost rises. Looking forward, the outlook remains challenging, and we do not expect Crest Nicholson to pursue completions at any cost, so we cut our estimates by 7-11% across the forecast period.
29 Jan 19
Cenkos: Budget 2018 - Sprinkling the gold dust?
To be honest whilst there was more in this Budget as far as the sector is concerned than has recently been the case, I believe investors will barely blink. On a bigger picture macro view I guess the decision investors have to make is whether it likes a new era of increased government spending (£30bn irrespective of Brexit), personal tax cuts and real wage growth at the expense of slower OBR forecast GDP growth and increased government borrowing ratios. However, at a more micro sector level:
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31 Oct 18
LIBERUM: Crest Nicholson* - Strategy change reflecting slower demand at the upper end
Crest Nicholson has announced that PBT for 2018 will fall short of expectations (by around 12%) as the market remained tough for units in London and at higher price points in the South East. It did not experience a meaningful uptick in sales in the autumn. In response, management will forsake growth until conditions improve, with enhanced cash flows being used to pay and maintain a high dividend (33p) for 2018 and 2019. Crest Nicholson's strategy reflects the tougher conditions, but the step up in free cash flow should demonstrate the strength of the landbank. This remains a strong housebuilder in our view, with problems coming mostly from its challenging geographical mix. We cut our rating to Hold, seeing strong support from the revised NAV of 331p (which forms our target price) – we expect a re-rating to start once investors can see reduced uncertainty in Crest’s challenging areas and as implementation of the strategy gets under way.
17 Oct 18
LIBERUM: VIDEO: Crest Nicholson - Long term attractions undervalued
In these three short videos, Building Materials & Housebuilders Analyst, Charlie Campbell, looks at his recent initiation on Crest Nicholson, with a focus on why he likes the shares, his confidence in margin stability returning and what investors are missing.
06 Jul 18
UK Housebuilding Sector in 2Q 2018
This VAR was conceived in 2010 by the Royal Netherlands Football Association (KNVB) but it was seven years later, in April 2017, that it had its professional club competition debut in the A-League in Australia in a match between Melbourne and Adelaide.
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04 Jul 18
UK Housebuilding Sector
This ominous-sounding term originated from the work of famed Swedish meteorologist, Tor Bergeron (1897-1977), but it only entered popular vernacular this year – and there have been ample opportunities in 2018 to use it.
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09 Apr 18
UK Housebuilding Sector: Q1 2017
Baron King of Lothbury, also known as Mervyn King former Governor of the Bank of England, is married to Barbara, a Finnish lady. She was his girlfriend in 1970 but distance and steam-driven telecoms conspired to keep them apart. Barbara went on to marry someone else and divorce - before being reunited with King in the late 1990s. They married in 2007 and King, who had never had children, was presented with two step-children and four grandchildren; and, in a Sunday Times interview, he quoted the Finnish apothegm “Grandchildren are the dessert of life”.
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10 Apr 17
Housing White Paper: ‘Up not Out’ and ‘Rent not Buy’
Initially the market is likely to be pleased with the White Paper (WP) in so far as the sector is concerned; there is no revolution taking place which is radically moving from demand-led to supply-led policy (for owner-occupation) nor policies which appear to be aimed directly at industry competitiveness. However, I do not see that being a sustained view and I remain of the opinion that the current (PD) housing cycle will start to roll over in 2019 driven either by rising interest rates or further political shift, hence the market may start to reflect that in 2018. For now I remain neutral/mildly positive on the Housebuilders but would be contemplating pre-cautionary reductions in sector exposure beyond this year or into meaningful bouts of strength.
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08 Feb 17
‘Billions’ - UK Housebuilding Sector - Q2: Summer 2016
The pilot episode of the much-hyped new TV series ‘Billions’ raked up almost three million viewers on debut in January of this year, which was a new record for Showtime. It is a sort of ‘Wall Street’ for a post Global Financial Crisis (GFC) audience. Damian Lewis heads the cast together with Paul Giamatti - and, the often parsimonious, IMDb has awarded the programme a premium 8.4 score. Lewis’s character Bobby Axelrod is an ambitious hedge fund manager and the sole survivor of the part-eponymous, Axe Capital, during the 9/11 attacks. Bobby is clever, charismatic and charitable (but not whiter than white). He is also very rich, lives in a nice house and knows what ‘billions’ is/are - and has a few himself; albeit these billions tend to slip in and out of his grasp, as is their wont. The UK Housebuilding Sector is also ambitious and survived the collapse of Lehman Brothers and the ensuing Global Financial Crisis. Similarly, it is smarter and wealthier than it has ever been; and, yes, charitable but not atramentous. It is also in award- winning form, which is a good job as it acts out another palpable crisis - the Brexit vote - and a £9 billion loss of value in six trading days. But do not despair.
12 Jul 16
UK Housebuilding in 2015; and a look to the future - The Fantastic Four
The Fantastic Four is Marvel’s original and longest running superhero team who, through a cosmic incident, develop super powers; and then use them for good. Reed Richards (Q1) is able to stretch like rubber, while Johnny Storm (Q2) can produce fire at supernova temperatures and is able to fly. Meantime, Sue Storm (Q3 and sister of Johnny) can turn invisible and create force fields, especially when angered; and, finally, Ben Grimm (Q4 or ‘The Thing’) becomes a large, rock-like creature with immense strength. In 2015, the UK Housebuilding Sector embraced the legend and its own extraordinary powers - and was able to fight off the common arch enemy Dr Doom.
14 Jan 16