Watkin Jones’ year-end trading statement outlines its successful completion of all 10 planned student accommodation developments for FY2017, and reinforces the excellent visibility it enjoys due to its strong development pipeline and robust forward sales position. As we have outlined before, the company operates in two of the hottest areas of residential real estate, namely purpose-built student accommodation (PBSA) and build to rent sector (BTR) and it operates a lower risk model. Therefore, it deserves to trade at a significant premium to mainstream Housebuilders.
The largest division of Watkin Jones has again performed well in 2017 with 10 developments being completed as planned (3,314 beds). Looking into 2018, 10 planned developments (3,415 beds) have been forward sold and provide the company with significant visibility. The 2019 position is also strong with five developments (2,959 beds) already forward sold. In addition, the company has secured an additional eight sites (2,959 beds) for proposed development between 2019 and 2021.
Watkin Jones is continuing to build momentum in the BTR sector. The Group has ownership of three development sites and is in separate negotiations on several other opportunities, from which it is targeting to develop approximately 1,500 units between 2018 and 2022, subject to securing the necessary planning consents. We believe the medium term opportunity within this space is significant.
The asset management business, Fresh Property Group, which includes Fresh Student Living and Five Nine Living, continue to progress in line with expectations. The number of beds under management has increased by 30% over the past year (16,082 beds) across 53 schemes for 2017/18.
Watkin Jones’ shares trade on 14.9x PER for September 2018 with a 3.1% dividend yield. For the following year the PER falls to 14.3x and a yield of 3.4%. This premium rating is deserved given its long-term record of growth, strong cash generation, and excellent medium term prospects.