Buying the best rarely comes cheap - albeit occasionally, the market offers up quality stocks at compelling prices. Enter Watkin Jones, a UK developer & manager of large, multi-occupancy accommodation - mostly student bedrooms (PBSA) and/or apartments for young professionals (BTR) – trading on a modest 13.2x FY19 PER and paying an inflation busting 3.8% yield.
This morning the company uncorked another virtuoso set of results, with FY18 turnover (£363.1m up +20.3% vs LY), PBT (£50.1m, +15.7%), EPS (16.0p, +13.8%), dividends (7.6p +15.2%, 6.6p) and net cash (£80.2m +95.5%, worth 31p/share) all coming in ahead of our forecasts. Primarily thanks to a standout performance from PBSA - £60.7m gross profit (equivalent to 84% group) on sales of £321.7m (margin 20.0% vs 21.0% LY), where 10 developments were completed covering 3,415 beds (3,314 LY) - ably supported by composed displays from the other 3 smaller divisions.
YTD’19 trading is shaping up to be another record too, on the back of healthy growth/returns from PBSA & BTR vs most other fixed income assets (see below). Sweet music indeed, especially for liability orientated investors (eg pension funds).