Berkeley Share Discussion Threads

[r ball] 20/5/2014 14:03

Indeed. No chance of a bid. BKG is very much a focused money making machine. They are a concertina company (growing and shrinking in line with the industry cycle). At the moment they are shrinking (land bank not being replaced).

BTW: I have a bit miffed by the dividend policy.

A capital return would be more tax efficient for small shareholders. But then again, as least you know what you are getting into when you buy the shares.

[badtime] 20/5/2014 09:41

Sums it up nicely...wishful thinking Monty

[essentialinvestor] 20/5/2014 08:57

It about 3 miles monty, but yes it's the same area.

The BKG strategy is outlined very clearly, no chance of a bid.

BKG do not want a bigger business as has been detailed on here,
they are focussed on returning £13 a share by 2021 - which the BKG directors
are hugely incentivised to deliver on.

[montyhedge] 20/5/2014 08:41

I'm long Crest, but would take Berkeley shares, Berkkeley based in Cobham and Crest in Weybridge 1 mile up the road, surely they must chat.

[essentialinvestor] 20/5/2014 08:33

I'm guessing you are long Crest N monty, I think their HQ is in my neck of
the woods, Weybridge.

There is not even the remotest chance of a bid at this stage, capital return
is the BKG priority as you are well aware.

[montyhedge] 20/5/2014 08:25

I would like to see Berkeley takeover Crest Nicholson, both in the South East and London, but Crest great land bank.

[essentialinvestor] 19/5/2014 11:29

Well Dr, who is going to build the property required?, the major house builders mainly.

We are overdue some volatility in wider equity markets.

[dr_smith] 19/5/2014 11:07

EI - I agree, the changes are about stabilising growth without boom and bust, which is good for housebuilders, house-owners and the economy, it is a win win win situation.
Buy my view often seems to differ to the market where short term vision or more accurately greed for quick results, seems to rule.

So, after weeekend news I looked nervously to see housing kick off 1% up, the right direction, though BKG 1% down, now sectors gains have dribbled away to little changed.

Fingers crossed for a bounce this week after last weeks market wide dip/ sell off, which seemed to be without justification in business terms.

[envirovision] 19/5/2014 10:26

I would say if one party chose to ignore it and the other manifest it, the former could loose and awful lot of votes, I suspect it will start to happen sooner than you think.

[essentialinvestor] 19/5/2014 10:18

enviro, I would not expect much progress over the next 5 years,
this will be an incredibly slow process.

The tightening up of the mortgage application process and potential
restriction in the number of high value to earnings loans are all positives
over the medium to longer term.

This is something which should have been acted on sooner imv.

[envirovision] 19/5/2014 09:55

Eye, we have no option but to build on green belt, the country is simply way to full.

There needs to be some way of putting NIMBY's in boxes and burying them, I'm afraid the time to have cherished the country for what it used to be has long been and gone in a population tidal wave.

Another thing that needs to happen is stampt duty needs to be rationalised, the 250K jump is clearly unfair and is forcing construction of 250K sandwich boxes rather than 280K shoeboxes

[essentialinvestor] 19/5/2014 08:13

Help to buy should have been capped at 500k, most of the listed house builder
mean price average is in the approx 300-350k price range, including BKG.

At last there is consensus from the BOE to red Ed that significantly more
property needs to be built annually, and only the house builders can provide this.

[melody9999] 19/5/2014 00:27

Werty - a number of reasons the price has fallen:
- investors moving out of housebuilders sector - traditionally they are weakest in Q2 and 3 of any year.
- concern that general markets are toppy
- concern over possible interest rate raises and other measures that might dampen demand
- FTSE250 was caned generally last week

I am still here because of the proposed dividend payout - as demand for housing is still so strong, in my view the dividend will not be under threat any time soon. At these share price levels, that makes BKG a compelling purchase for the medium term - the best buys are often those that are most difficult at the time. And tomorrow could be a good time to add if Mark Carney's comments cause a rush for the exit.

[r ball] 16/5/2014 17:17

I've held since 2009 and the correction is a bit annoying. I expect a recovery in the price once it has stablisised and then a hike on results (which could include an acceleration of the cash return).

Don't forget - it takes less than 15 seconds to sell - and don't become too attached!!

[dr_smith] 16/5/2014 13:49

Werty - fingers crossed for a nice bounce back up sometimebefore the theoretical summertime lull during school holidays.

[envirovision] 16/5/2014 13:16

Right I've taken a few for the long term here ;)

[werty5] 16/5/2014 13:03

Thank you Essential and Dr Smith I guess this will have to be filed under a long term hold of a couple of years and see where it goes. Long term I can't see a problem even if I have been caught out in the short term.

[dr_smith] 16/5/2014 11:26

Yes, tanked even more today, though it's not just property sector.
FTSE is showing down only .33% today, but 'average' seems much lower, as shown on this heatmap:


I'm not aware of business reasons and can only assume it's market makers playing manipulative games and/or as FTSE is (or was) on a high, folks are assuming it can only go down, rather than break into new 'high' territory.

All IMO. :-)

[essentialinvestor] 16/5/2014 11:17

werty, rotation in to less cyclical sectors over the past few weeks.
BKG is a fantastically run company IMV, FWIW.

[werty5] 16/5/2014 10:52

Must admit this is my first share holding in a building company thought it was a good time to buy because of house prices going up and the need for more houses especially in the S. East. Since investing the price has just gone south and I am a fair bit underwater now. Was wondering after what seemed to be a good IMS why this price keeps reducing is there something I have missed? Perhaps someone more in the know than I can advise. Thank you.

[dr_smith] 16/5/2014 10:06

Hi Miata,

Thank-you for your structured thoughts, which I agree with in general, but the extent to which they apply to BKG is debateable.

Below are some extracts from their latest IMS:

-- anticipates completing some 30% more homes than at the peak of the market in 2007.
--We are working to deliver more, but reiterate the importance of maintaining a stable and predictable regulatory and taxation environment to enable this continued investment.
-- As previously stated, Berkeley has the land with implementable planning permissions in place that will enable the Group to achieve the second milestone, equivalent to further dividends of £4.33 per share by September 2018.
--The Group has increased its land holdings with the acquisition of five further sites since the half year. Of these, two will be immediately added to our land holdings and three sites included in our future pipeline as they are controlled conditionally, dependent on securing a planning permission and vacant possession.
--This activity leaves the Group well-positioned to maintain the estimated future gross margin in its land holdings at £3 billion whilst continuing to deliver sustainable returns on equity.
--Approximately 86% of the Group's land holdings have an implementable planning permission and all of these sites are in the course of construction, consistent with our previous disclosures in December.

Land bank:
Standard accounting practice is to factor in replacement cost (of land bank) and whilst land has increased in price (say 33% of cost), sale value increases more than offset.
Rising land bank costs are to be expected and not a barrier to growth - though admittedly 'London' is often an exception to the rule.

Planning consent - above IMS quotes 86% obtained, so doesn't look like a headwind. Additionally, my undersdtanding is the government is very much encouraging developments, so no more a headwind than usual.

>I doubt whether it is the result of a spreadsheet where its constituent data hasn't been fully entered yet.
As you say, planning consents are a variable/contingent factor.
If planned 2016 builds are still awaiting consents, then these developments are likely not included in their spreadsheet forecasts.

In the period Dec 2015 - 2016 other builders have EPS growth of 20% plus, faced with same landbank costs and in same economy.
E.g. Telford have 21% forecast EPS growth for y/e/ 31/3/15.

You could well be right that the return of equity via dividends reduces their profitability in the shorter 2 year term, but I always take third party sources with a pinch of salt, unless they can be verified either from sources, either direct from BKG statement or reliable third party with independant data source.
The mortgage restrictions, along with interest rates possibly slightly increasing next year are both there to assist a managed growth period, rather than boom and bust.
Again, this should assist builders having growth 2 years hence and beyond.

So, it could well be 2% EPS growth for 2016, but without verification, its basis and reliability is questionable.

Has anyone seen other sources referencing 2% - or any other figure?

[essentialinvestor] 15/5/2014 20:07

Great sumMation MIATA.

Optimal sizing is something BKG excel and the cyclical context of their
market is continually referenced, more than sensible imv.

Met TP when I was a teenager in the late 80's, he was millionaire by 21
from memory.

[miata] 15/5/2014 18:27

I doubt whether it is the result of a spreadsheet where its constituent data hasn't been fully entered yet.

I am not surprised that growth tails off, like my car won't accelerate to 200mph but even if it could it would be riskier and less efficient.

In BKG's case, I would imagine the headwinds are using up the land bank which has been built up since 2009, increasing interest rates and reducing affordability, the effect of the state of the economy on market demand for housing, mortgage availability, the rate at which planning consents can be obtained, the increasing marginality of available sites in the South-East and the fact that BKG agreed a long-term strategic plan to return £1.7 billion in cash to shareholders in order to remain an optimal size.

Or in the words of the MD :
"This approach respects the fact that the property market is cyclical and that there are continuing barriers to accelerating the delivery of new housing. By operating at a natural size with a market-leading brand and adding value in every area of the business, Berkeley can maintain the flexibility to react to changes in the market,invest opportunistically in the right locations at the right time or return surplus cash to shareholders."

Only today the CEO of Land Securities announced moves to de-risk its property portfolio in order to enter the next cyclical downturn with a portfolio of properties already let out on long leases.

[essentialinvestor] 15/5/2014 15:32

The yield over the next couple of years is looking very attractive at these
levels based on the capital return - if markets sell off then clearly it's going lower.

Any other views?.