Berkeley Share Discussion Threads

[jonwig] 24/7/2008 10:19

This morning's FT:

Berkeley Group added 5 per cent to 810p on talk that its biggest shareholder, Saad Investments [29.4%], was willing to back a management buy-out of the upmarket housebuilder.

[jonwig] 14/7/2008 19:30

Thanks H.
I think a few commentators are trying to call a bottom on housebuilders, and BKG is the safest bet - especially if it's a wrong call!

[jonwig] 12/7/2008 10:25

Housebuilder relies on strong foundations

By Amanda Vermeulen

Published: July 12 2008 03:00 | Last updated: July 12 2008 03:00

It is a Herculean challenge finding value in the housebuilding sector at present. The outlook for Berkeley Group bucks the trend, however. Unlike its peer group, it has negligible debt and a sizeable war chest to snap up good land from distressed sellers. According to brokers UBS, £363m set aside for expanding its land bank should translate into a tidy asset base of £2.8bn that offers a gross margin of £830m. The company has a record for calling the market's cycles accurately; good forward sales, has not needed to impair its asset base, and has garnered appreciation for its capital return programme. Still, its shares have lost 40 per cent of their value in the past year. Understandably, investors are nervous about taking a punt on housing right now. Shares in Berkeley - at 672.5p on Friday - have retraced some of their losses but are still well off the year high of £15.40. Those investors with a long-term view may be enticed to take a closer look.

[jonwig] 11/7/2008 15:00

When the brick dust settles

Published: July 11 2008 09:58 | Last updated: July 11 2008 09:58

By the time the UK housing market hits bottom, a few of the housebuilders may well be leading an undead existence, controlled by nervous bankers. Attention has naturally focused on the most sickly, such as Barratt Developments, but all have seen their share prices plummet. So who will survive, and what will be left of them?

Tony Pidgely, chief executive of Berkeley Group, remains a man to watch. During the last downturn he was one of the few who took the opportunity to snap up land at deeply depressed prices. Since 2004, Berkeley has focused on profitability, rather than join the chase for ever higher volumes. So while Berkeley's market capitalisation has halved in the last year, to £900m, it trades at a semi-respectable 6 times consensus earnings. At the end of June, the virtually debt-free group announced that it would defer a planned return of about £400m cash to investors, preferring to spend it on cheap land.

Bellway, down two-thirds in the last year, is similarly well placed thanks to a lightly leveraged balance sheet. Meanwhile, small hybrid companies such as Kier, also down two-thirds, have the benefit of contracting businesses that continue to produce cash.

Beyond that it gets more difficult, and the last week has shown that past assurances are worth little as conditions deteriorate. Bovis is not heavily burdened with debt, but the previously sacrosanct dividend has nevertheless been slashed. Redrow had a reputation for being a particularly astute buyer of land, but indicated this week that significant asset write-downs are inevitable. Given such gloom, the sanguinity emanating from Persimmon suggests the sector bellwether is still too optimistic. It is cutting jobs but not otherwise scaling back the extent of its operations, while expectations for only minor writedowns reflect a belief that margins can be sustained. Until reality sets in, it is far too early to contemplate the other side of the slump.

[gsands] 03/7/2008 18:13

Large director buy here this week:

Berkeley Group Holdings Units (BKG)
Director name: Mr Anthony (Tony) Carey
Amount purchased: 35,198 @ 678.90p
Value: £238,959

[judge jury] 03/7/2008 08:30

I was joking

[judge jury] 03/7/2008 08:20

BKG worth more than BDEV, TW and RDW combined. Amazing. Perhaps TP should buy the lot?

[jonwig] 02/7/2008 12:18

JJ - yes, and they could well buy some distressed building land at rock-bottom prices.
They have the cash.

[judge jury] 02/7/2008 10:05

BKG now the biggest listed UK housebuilder (I think), which is pretty amazing. PSN is worth £713m, BKG worth £726m. Hats off to TP

[jonwig] 01/7/2008 17:24

True, Aleks - and they are shrewd operators who know the business.

Actually, Abbey [ABBY] have net cash and the strongest balance sheet in the sector. Trouble is, they are Irish, where they have possibly worse problems.

[aleks147] 01/7/2008 16:43

I think Berkeley haven't fallen as much as the others, because they are less into main stream housebuilding and more into the social housing\ regeneration aspect.
Also, Berkeley is the only housebuilder with no debt - which i suspect makes a huge difference in these "tight " credit times

[jonwig] 27/6/2008 07:20

FY results.
On a decent day, the share price should react positively.

[m.t.glass] 12/6/2008 10:47

also yesterday -

..Shares in Berkeley Group Holdings Plc. fell in early morning trade after Goldman Sachs reduced its recommendation on the UK housebuilder to 'sell' from 'neutral' and dramatically slashed its target price to 582.3 pence from 819.9 pence, according to traders...

[jonwig] 10/6/2008 18:34

London, forwood ... top value end is holding up well. Also land values have risen faster than most places, so BKG's land bank is more secure from write-downs.

[forwood] 10/6/2008 18:25

Insert todays price into that analysis and BKG has a lot further to fall. It's the only one nowhere near the suggested 15% house price fall value.

"For Barratt (now 91p), we estimate a 15% house price decline suggests equity value of 96-114p. A decline of 20% would likely leave equity worthless and the banks seeking to recover their full debt.

"For Taylor Wimpey (65p), we estimate a 15% house price decline suggests equity value of 84-99p. A decline of 20% would suggest equity value of 11-19p.

"For Redrow (166p), we estimate a 15% house price decline suggests equity value of 182-200p. A 20% decline would suggest equity value of 90-99p.

"For Persimmon (389p), we estimate a 15% house price decline suggests equity value of 272-397p. A decline of 20% would suggest equity value of 92-155p.

"For Bovis (344p), we estimate a 15% house price decline suggests equity value of 366-432p. A decline of 20% would suggest equity value of 252-285p.

"For Bellway (508p), we estimate a 15% house price decline suggests equity value of 518-605p. A decline of 20% would suggest equity value of 307-386p.

"For Berkeley (730p), we estimate a 15% house price decline suggests equity value of 344-358p. A decline of 20% would suggest equity value of 183-190p."


So why hasn't it fallen in line with peers?

[kiwi2007] 05/6/2008 21:54

----sorry wrong board :(

[jonwig] 05/6/2008 19:04

Housebuilder shares collapse on horizon
June 5, 2008 4:25 PM

Before investors get too carried away with today's rise in the value of housebuilding shares, analysts at ABN Amro have become the latest to pour cold water on the sector.

They say: "With a continuing collapse in new sales, acceleration in cancellations, outgoing cash flow commitments and unsustainable levels of debt-funding, the UK housebuilders are likely to begin issuing additional equity in the coming
weeks/months."

ABN has also calculated the effect on each of the builders of various percentages of house price decline and has come up with some scary figures. Its remarks are worth quoting in full:

"For Barratt (now 150.25p), we estimate a 15% house price decline suggests equity value of 96-114p. A decline of 20% would likely leave equity worthless and the banks seeking to recover their full debt.

"For Taylor Wimpey (83p) , we estimate a 15% house price decline suggests equity value of 84-99p. A decline of 20% would suggest equity value of 11-19p.

"For Redrow (226p), we estimate a 15% house price decline suggests equity value of 182-200p. A 20% decline would suggest equity value of 90-99p.

"For Persimmon (462.5p), we estimate a 15% house price decline suggests equity value of 272-397p. A decline of 20% would suggest equity value of 92-155p.

"For Bovis (406p), we estimate a 15% house price decline suggests equity value of 366-432p. A decline of 20% would suggest equity value of 252-285p.

"For Bellway (626.5p), we estimate a 15% house price decline suggests equity value of 518-605p. A decline of 20% would suggest equity value of 307-386p.

"For Berkeley (820p), we estimate a 15% house price decline suggests equity value of 344-358p. A decline of 20% would suggest equity value of 183-190p."

They conclude: "On the assumption that house price deflation is limited to the -15% inherent in our forecasts, Barratt and Persimmon are, in our view, the two volume housebuilders where potential economic asset values remain significantly below current share prices. If, however, house price deflation (or expectations thereof) moves towards -20%, then we believe all of the housebuilders' economic asset values would suggest further downside risks from current share price levels."

[jonwig] 04/6/2008 18:38

Times:

Housebuilders crumble as analysts wield the axe
James Rossiter, Property Correspondent

Britain's big seven housebuilders saw more than £300 million wiped from their combined market value in early morning trading today as UBS slashed its targets across the sector, bringing to £13.5 billion the total value erased from the big builders in the past year.

Analysts at UBS today gave warning of falls of up to 20 per cent in the price of new homes.

They told clients today that housebuilders' sales volumes for the full year were likely to fall at least 30 per cent, which would put sector profitability under "extreme pressure."

Shares in Barratt Developments, Britain's second largest builder of new homes, tumbled to a fresh low, down 19.5p to 137p, a decline of 12.5 percent, erasing £65 million from its market value to £477 million. A year ago Barratt shares were changing hands for nearly £11, valuing the firm at £3.8 billion. The firm had just completed a £2.2 billion cash acquisition of Wilson Bowden.

A year ago Britain's seven largest housebuilders had a combined market value of £18.5 billion. Today's sell off diminished their combined value of the battered builders by over £300 million leaving them worth in total just under £5 billion.

Concerns are mounting that Barratt, which is labouring under about £1.7 billion of debt, will by the end of this year be forced into a heavily discounted share rights issue to raise new cash. Declining sales will put its ability to service interest payments under pressure and hamper its ability to quickly restart its building programme when market conditions eventually improve.

UBS today cut its price target for Barratt to 160p per share from 375p. Barratt has slowed its opening of new sales sites to a snail's pace.

Taylor Wimpey, the largest UK housebuilder which is in the process of closing about a third of its sales offices, was also hit badly after UBS slashed its price target on the shares from 165p to 90p. Taylor Wimpey shares fell more than 9 per cent, down 7.5p to 74.75p, wiping £78 million from its market value to £780 million.

A year ago Taylor Wimpey shares hit a high of 455 1/2p valuing the group at £4.8 billion shortly after the all-share merger of George Wimpey and Taylor Woodrow.

Industry data out yesterday showed that the building of new homes slumped to a record low.

UBS cut its target price on Persimmon, the third biggest builder of new homes but today the UK's most valuable housebuilder, fro, 640p to 400p. Shares in Persimmon, the most lowly geared of the big housebuilders, fell nearly 4 per cent, down 17.5p to a long-time low of 438.5p, wiping £54 million from its market value to £1.3 billion.

A year ago at the peak of the housing market Persimmon was valued at £4.1 billion. Persimmon said in April that it would stop building on new sites until market conditions improve.

Among the other big builders, Bovis Homes saw its share price target cut from 530p to 411p, Bellway was marked down 580p to 795p and Redrow, viewed like Bovis as a takeover target, was cut back from 285p to 208p as UBS warned of a risk of capital raisings coming onto the agenda.

Shares in Bovis declined nearly 6 per cent, a fall of 23.75p to 387.25p, reducing its market value by £30 million to £466 million. Bellway shares suffered a similar rate of decline, falling 35p to 568p, marking its market value down by £41 million to £652 million.

Redrow shares tumbled 8.5 per cent, down 19p to 204.25p, leaving its market value at £327 million, a fall of £30 million in early morning trading.

Berkeley Group, London's largest housebuilder, felt the pain from the sell-off in the sector as its shares declined 2.5 per cent, a fall of 19.5p to 780p, leaving its market value at £940 million, down £24 million in the morning.

[jonwig] 02/6/2008 11:39

FT, Lex:

Sometimes life is terribly unfair. Chastened by the downturn of the early 1990s, the UK housebuilders did not build speculatively this time round. There is no stock of unsold houses as in Spain and the US to weigh on prices. However the tightness of credit – prompted in part by the excesses in US housing – has had a rapid and dramatic effect on volumes in the UK as mortgage lending has been reined in. Overall sales in April were half the level of a year before, and homebuilder reservations (where a buyer hands over a deposit before the house has actually been completed) were down by roughly two-thirds.

A realistic forecast for price declines of 15 per cent for this year combined with sales volumes down by a third would probably mean the industry makes an operating loss. That means share prices are now discounting Armageddon as well as writedowns to the value of land holdings. At the start of 2007 the seven largest companies had a combined market capitalisation of more than £19bn. They are now worth less than £6bn.

The sector trades on about 0.7 times tangible net asset value, with the two most heavily leveraged companies – Barratt Developments and Taylor Wimpey – on just 0.3 times. A lack of profits means that investors are also anticipating curtailed land purchases. The buying of land for future development is the foundation of the housebuilder model and essential to generating profits in the future.

Bankers will be eyeing loan covenants nervously. In the US, two of the housebuilders rated by Moody's have entered bankruptcy protection so far this year and the remaining 19 are all on negative watch. Increasing resistance to renegotiating lending terms is expected and the builders are furiously trying to cut working capital and keep cash flowing. The UK sector will have to follow suit, which means dividends are under threat. The trouble is, housebuilders will not want to miss out on the opportunity to buy land when prices are depressed. A round of Autumn equity raisings now seems inevitable.