Your last paragraph sums the situation up well. life is a matter of alternatives, and as you correctly point out, a good dividend is worth having . I keep a large sum of money in cash these days , and I am not bothered by the fact it earns no interest; relatively speaking it is safe.I sold BVS earlier this year.I could be tempted back in at some point.|
|This certainly is an unloved share in an unloved sector.
I see a housing market that is structurally undersupplied. The builders by their own admission all seem to be saying that the government has become much more supportive on the planning front recently. There is a risk that the government might withdraw "Help to Buy" which is propping the market up, but they have confirmed this will continue until 2021. On top of that, the new Prime Minister wants to get the aspirational classes on side and I suspect she sees a property owning democracy as a good thing, much as a predecessor of hers, so I expect government support for the sector to continue.
The company itself is based primarily in the South East which is the most affluent region, but is also represented in the midlands and North West, so exposed to HS2 (shovels in the ground next year apparently), Midlands Engine, Northern Powerhouse etc. The company seems very conservatively run, with virtually no debt. At the same time, it has put in place the administrative structure to take annual volumes from 3635 in 2014 to an eventual target of 5,000-6,000pa. The current year should deliver 4,300 and capacity growth is about 400pa.
The share yields about 6% and is on a prospective PE of about 7. In addition, housebuilders are resilient. If there's a crash they just stop building, sell from stock and wait for the market to stabilise and start all over again.
The share price looks like a falling knife, but as a long term investor, its cheap enough for me and I have bought at 750p. Where else should I put my money? In a bank deposit paying 0.8%pa or should I buy a fancy internet marketing stock on a PE of 25 and wait for the inevitable profit warning carnage?|
|That's certainly one view roddiemac , however it seems too pessimistic for housebuilders given long term structural deficits in house building over the years and relatively high affordability along with a better than expected economy (see excerpt below). While prices are indeed high I am not so sure that the cycle is anywhere near done yet. Hence why it may be worth considering the large growth still ahead of Bovis compared to its quite low shareprice. However admit that the overly pessimistic view is certainly in control currently. Regards,Source. "Britain escaped a severe economic slowdown in the three months after the Brexit referendum shock, official figures are expected to show on Thursday, further diminishing the chance of a fresh interest rate cut by the Bank of England next week...."|
|I reckon that the housing market is slowing down now : not before time. the argument that low mortgage rates make it " affordable " to buy overpriced houses is a stupid one . sadly , in a property obsessed society like the UK , boom and bust is considered almost normal. At current prices , house buyers will have nothing left to pay the ever increasing running costs. inflation will inevitably erode any spare capacity they have.|
|So when will that be: in a month, a year, ten years????|
|House prices do very well until just about nobody can afford them , then they crash.|
|House prices do very well in inflationary environments I believe. Bovis is unloved, that much is clear to me unfortunately. However I think it's performance will change people's minds as we progress into the new year and if the management doesn't trip itself over again. Sounds from all builders has been very positive after Brexit, but Bovis hasn't fully benefited from all that yet. Regards,Source.|
|House prices are simply way too dear ----Demand must at some point falter----inflation cometh.|
|Nice to see brokers starting to correct their eps forecasts upwards for both 2016 and also 2017. As I posted before, it seemed odd to me that that brokers dropped their forecasts drastically after Brexit for no real good reason. Still lots more upgrades need to be done if it normalises back to its normal pre-Brexit eps forecasts alone let alone the improved prospects Bovis has since modestly repo, so should hopefully much more normalisation is to come on this. The current low share-price has obviously a long way up to go if/when that correction process continues. Regards,Source.|
|Think there are two viewpoints with Builders:
High-end properties will come down & with fall in value of £ make them more attractive for foreign buyers. Conversely the uncertainty about Brexit & possible loss of some jobs in the financial sector could put any movement upmarket on hold for high-earners.
Yet more talk at Tory Conference about need to encourage building of new homes - focus seems to be on 250k more per annum.|
|And then in latest issue:
Bovis - Shares make strong recovery
918p Epic code: BVS
(Momentum Investor) Our Buy tip two issues ago at 660p looks well-timed with the shares rallying with the house building sector, helped by strong results elsewhere (notably Persimmon).
First half results for period ending 30 June were bang in line with revenues, pretax profit and eps up 18%, 15% and 14% to £413m, £61.7m and 36.5p, respectively. Net debt fell from £59m to £8m. Sales price inflation and cost inflation were broadly aligned so gross margin was unchanged at 24.3%. However, operating margin rose from 14.7% to 15.5% due to better overhead utilisation.
Bovis achieved 5% growth in legal completions to 1,601 homes (H1 ’15: 1,525) while the average sales price increased 14% to £254,000.
In the first half it invested 1,267 consented plots across 11 new sites and now has a consented land bank of 19,477 plots across 138 sites.
Crucially, current trading has not been weakened by Brexit with over 90% of planned home sales for 2016 achieved (as at 12 August), while reservation rates are improving after a short term slow down in July. Its southern focus, excluding London, also leaves it well positioned. Eps forecasts are unchanged for this year at 108.8p but clipped a little from 111.9p to 105.3p. The dividend is expected to rise to 46p. Keep holding.|
|The Momentum Investor wrote back in August: UK Housebuilders- Once-in-a-decade ultra low PEs:
Bovis Homes (BVS; 660p)
Bovis Homes famously entered the credit crunch with one of the most conservative balance sheets after overstretching in the mid 1970s banking crisis and this time round it’s also solid with net cash currently £30m.
Today Bovis is the UK’s sixth largest house builder and specialises in green field locations in the south, typically edge of towns and within large villages. 56% of dwellings are 3-4 bedroom family homes with 14% 5-6 beds, 23% social housing and just 7% apartments. Customers are a mix of first-time buyers and families moving up the housing ladder, while Help-to-Buy was used by 35% of customers.
It has a healthy land bank of almost 20,000 plots (c. 5 years supply) and plans to expand output from 3,935 homes in FY’15 to 6,000 in the medium term, although this may now be revised down.
Deutsche Bank forecasts eps of 114.1p this year, dropping the forward PE to just 5.8, while the price to book value is only 0.8 times. The dividend yield of 6.8% (45p) also provides support. Buy.|
|I got a little jittery when the value of my holding collapsed immediately after the referendum at end of June. Have taken opportunity to add to this today. I connot pretend I will have much to add to the thread, except that I believe that government policy is supportive of infrastructure and for commercial housebuilders, I expect that there will be opportunity to bid.
For each contract where BVS are engaged, their existing land banks will not need replacing. I am therefore confident that this might not be a wasted opportunity, hence my purchase today.|
|So we can see Standard Life's sells are likely to have been holding Bovis down a tad then?Read elsewhere Standard Life (like other pension funds) were getting a lot of money pulled out of them so maybe this is related to that?They still have a large holding for them though so hopefully with that sale done this can start to get focus back on the positives increasingly emerging around housebuilders. Hopefully! :)...also still seems a rather large gap to fill around 960p too!Regards,Source.|
|Interesting and true IMO article....
Interest rates rocketing back to 1990s levels. Foreign investment funds fleeing for Frankfurt and Paris. The pound in free-fall, and the government slashing spending as a consequence of a collapsing economy. Foreign-born construction workers returning home in horror. Amid all this chaos, estate agents would be about as popular as Donald Trump in Mexico City, building sites would be closing down, and house sales would be less frequent than Southern Rail trains.
Yes, if you rewind to the beginning of summer, that was the consensus on what would happen to the building industry if the electorate was crazy enough to vote to leave the EU on 23 June. And yet, like so many of the cataclysmic Brexit warnings, events have not unfolded that way. In fact, it is now becoming clear that bricks and mortar will be one of the sectors that does best from the Brexit boom. Why? Because house prices will keep rising, planning restrictions should be eased, the government will boost spending, and on the labour supply aside, the industry will be one of the least affected by exclusion from the EU single market.
In the immediate aftermath of the referendum result, the view in the market was that construction, and housebuilding in particular, was doomed. Companies in the sector lost up to 40 per cent of their value, wiping £8 billion off businesses that included well-known names such as Taylor Wimpey, Persimmon, Barratt and Berkeley. It was always a bit hard to work out the logic of that sell-off: it looked more as if the market had just decided to trash someone, and builders happened to be the most convenient target.
Insofar as anyone could make sense of it, investors seemed worried about the warning from former chancellor George Osborne, dark overlord of Project Fear, that house prices would fall by 10 to 20 per cent in the event of a Leave vote.
If that had happened, it would indeed have spread carnage throughout the sector. Building a house takes a long time, and if its value is going down with every day the bricklayers and roofers are working on it, and if buyers are holding off because they think prices will be cheaper next month, then the economics of the industry are grim. Fortunately, however, that proved no more accurate than all the other predictions of imminent disaster. House prices have sailed on upwards much as they were doing before the vote — that is to say, up a bit, but not dangerously fast.
After the dust has settled, the outlook for housebuilders, and the construction industry more -generally, now looks a lot brighter. There are five reasons why.
First, while there may yet be damaging long-term consequences from leaving the EU, in the short term it has given the economy a boost. The Bank of -England has cut interest rates and relaunched quantitative easing, while the market’s sharp devaluation of the pound has helped exporters. Lower interest rates and a faster-growing economy should feed through quickly into healthier house prices — and those are the most critical factor in keeping the sector -buoyant. Even if the economy does flag next year, which is what most pundits still expect, it would be no surprise if the Bank and the government pumped money directly into the building industry, as they did with the Help to Buy scheme in the last recession.
Second, expect to see more infrastructure projects launched. In the wake of Brexit, the government has abandoned its target of balancing the books by the end of this parliament. We’ll see what chancellor Philip Hammond comes up with in his Autumn Statement, but it looks likely that he will ramp up spending, especially if it counts as investment. Expect the go-ahead for some headline-grabbing new projects, from a decision at last on London’s new airport runway to an upgrading of our creaking power network. Again, that will be a huge boost for the big construction firms.
Third, the labour supply will keep flowing. As we all know, Eastern Europeans have come over to Britain in their hundreds of thousands to work in the -building trade. Overall, 12 per cent of workers in the UK -industry are foreign-born. If that was suddenly cut off, the industry really would suffer. No one, including the government, has any clear idea what Brexit will look like yet , but even if free movement of European workers is ended, it now looks likely to be replaced by a work-permit system. So it’s highly unlikely that the supply of skilled construction workers will -suddenly dry up.
Fourth, the Leave vote has persuaded the political establishment that a huge segment of the electorate is fundamentally unhappy with the status quo. A big part of that is the slow-motion housing crisis. Homes have become increasingly unaffordable, while near-zero interest rates and the QE boost to asset prices are making the problem worse.
Right now, demand massively outstrips supply: we build about 150,000 houses a year, but need at least 220,000 to keep pace with a rising population and new household formation. If net immigration comes down as a result of Brexit — a big if — then it still won’t mean we have an excess of housing supply. The main bottleneck is a thicket of planning laws and regulations that hinder new building. Most of it has nothing to do with the EU, but leaving could still be the -catalyst for ripping up the red tape. If so, building would be a fast-growing industry again.
Finally, it will soon be clear that the construction industry is one of the most detached from the EU. Building, which accounts for almost 8 per cent of Britain’s GDP, is the second least internationally traded sector— the only one with less international involvement, rather obviously, being government. Nobody exports houses or roads. Nor are its supply chains bound up with the EU: most building materials are manufactured in the country where they are used, because cross-border transport costs are too high.
Many manufacturers will certainly notice the -difference if we leave the Single Market, but few builders will. They don’t sell anything in Europe, and they don’t buy much from Europe either.
Indeed, since the referendum, the sector’s results have all been positive. Barratt chief executive David Thomas said, on releasing results in September, that simply ending uncertainty has helped improve its performance. Its pre-tax profits were up 21 per cent year-on-year. Redrow reported profits up 23 per cent. Berkeley said sales of some new homes had been deferred ahead of the vote but had caught up since, and that the impact had been minimal.
That confidence is reflected in share prices. -Redrow has recovered from its post-referendum low of 294p to slightly more than 400p. Barratt has bounced from 388p to 488p. The same is true across the sector. But they are mostly still significantly down on where they were on 22 June. That looks crazy. There is no logical reason why the builders should be worse off once we are out of the EU — and plenty of reasons for thinking they might well do considerably better.|
|Why is Bovis's ROCE so poor?Regards,Source.|
|The Treasury’s £5 billion plans to boost housebuilding lifted shares in the UK’s biggest players amid hopes of tackling the UK’s “chronic” housing shortage.
Housebuilding shares have been ravaged by the Brexit vote but Chancellor Philip Hammond and Business Secretary Sajid Javid have unveiled a £2 billion fund to speed up building by using public land as well as a £3 billion loan pot for the smaller housebuilders frozen out of the market by a lack of bank funding since the financial crisis.
The Government also plans to relax planning rules with a presumption in favour of residential development.
News of the extra stimulus — as well as the likelihood of further Bank of England rate cuts — lifted a host of quoted firms by up to 2% today. Barratt Developments rose 4.9p to 499.2p, Taylor Wimpey added 2.8p to 156.9p, and Bovis Homes cheered 11p to 886p.
|Added at 838.|
|Decided to sell half at 848.5 as expect to see Dow & UK100 fall this afternoon.|
|BVS back to 847 - still down 3.2% today but now in line with other Builders.
Directors bought at 869 last week so tend to agree with you that they must feel that sales are holding up since the Brexit decision and their last qrt results.|
|Fingers crossed Jbd! Although a huge 5% drop today for no good reason suggests that it should recover at least. Just re-reading Bovis's recent report and it does seem the markets gloomy view is wrong if management deliver as they should. Regards,Source.|
|Decided to buy some at 838 & 836 this morning - you can never be sure where it will bottom out though !!|
|Another confirmation of thoughts expressed above... :)Regards,Source. http://www.standard.co.uk/business/market-report-housebuilders-rally-as-brexit-fears-fade-a3352466.html Two City brokers today admitted post-Brexit life for housebuilders isn't quite as bad as they had feared as they reeled in their gloomy forecasts.Scribblers at Liberum and Credit Suisse, two firms that slashed their forecasts after the EU referendum result, decided things have not played out as they had expected this year.Liberum admitted trading had been "much better than we feared" after upbeat data on the UK economy and the housing sector, which has boosted housebuilders' shares.|
|Source - agree that BVS CRST & BWY are lower enough now to tempt buyers.
Just managed to get BVS & CRST at 893 & 480.5.
Brexit risks are overplayed as London & South East are still attracting buyers because of the price of sterling.|