The company produced another strong set of results for the year driven by student accommodation developments. Revenues were up 13.1% to £301.9m, and when coupled with gross margin gains, this drove an 18% increase in gross profits. PBT rose to £43.3m; EPS +12.9% to 14.0p. The total DPS for the year was 6.6p, up 10.0% year on year. Net cash rose to £41.0m.

Watkin Jones’ largest division reported strong profit growth for the year with a good increase in gross margins. Visibility of sales and earnings is very high in this division and therefore it is set to have another solid year in 2018.

The company completed its first BTR development in Leeds in 2017. With five sites secured, and three further development opportunities progressing, we believe the medium term growth opportunity in this space is significant.

Fresh Student Living continues to grow its number of beds under management. It currently has 16,082 beds under management and this is set to grow to around 20,000 by 2020. Five Nine currently has 535 BTR units under management and we expect this to grow in the coming years.

Watkin Jones’ shares trade on 13.7x PER (calendarised) for September 2018 with a 3.5% dividend yield. For the following year the PER falls to 12.9x and a yield of 3.8%. In our opinion this is undemanding given the group’s consistent long term record of profit growth, its strong cash generation profile, its excellent medium term prospects as a leading developer within the growing UK student accommodation market and the growth opportunity within its BTR operation. 13.7x represents a 39% premium to the Housebuilding sector on PER.