Berkeley Share Discussion Threads

[sogoesit] 05/1/2015 10:27

Really, Billy?
Interesting perception about wealth, value, costs' perceptions of others; and perhaps not true. But on such judgements are decisions made!

[billy_liar] 05/1/2015 09:40

Quote "... For example, a buyer paying £2m for a property would now need to pay £152,000 in stamp duty rather than £100,000 under the old regime..."

I think anyone who can afford to spend £2M on a property shouldn't notice £52K extra stamp duty to pay.

Great yielding stock.

[gargleblaster] 19/12/2014 14:21

IC write up

Housing stocks have had a mixed 2014 and Berkeley (BKG) has been one of the biggest losers. The fate suffered by Berkeley's shares, which are down 7 per cent in the year to date, reflects the company's exposure to the high-end London market. Following several boom years, the market seems to have slowed considerably in 2014. Sentiment towards the London market was dealt another blow by recent stamp duty changes which considerably ratcheted up the tax take on very-high-value homes. For example, a buyer paying £2m for a property would now need to pay £152,000 in stamp duty rather than £100,000 under the old regime.

While investors certainly have cause to feel nervous, the market's fears seem to be running well ahead of the reality on the ground, as Berkeley is still making money hand over fist. Indeed, the group's half-year results earlier this month reported that cash due from forward sales had increased from £2.3bn to £2.7bn and underlying profits before tax rose by 30 per cent. What's more, the group continues to strike innovative new land deals, such as a recent joint venture with National Grid.

Some comfort, however, should also be taken from Berkeley's capital return plans which have been put in place precisely to stop management from spending too much on high-priced development land ahead of any potential downturn. A payout of 195p is expected this year. Along with Persimmon, analysts think Berkeley could potentially increase its capital return plans given its cash generation potential.

Market cap P Fwd NTM PE Dividend yield LT PEG P/BV EV/Sales
£3.4bn 2,526p 10 7.1% 0.76 2.18 1.90
3-mth momentum Net cash/debt (-) Av. EPS growth, next two FY 3-yr EPS CAGR 3-yr DPS CAGR Tests failed
7.7% £148m 17.4% 42.0% - 3yr DPS CAGR > 5%, 3yr FCF CAGR > 10%
Last IC view: Buy, 2,641p, 5 December 2014

[r ball] 18/12/2014 08:59

my mistake. sorry.

[scottishfield] 18/12/2014 08:45

yes it is today 18th. (X D)

[manrobert] 18/12/2014 08:41

xd today I hope.

[r ball] 18/12/2014 08:36

ex div tomorrow!

[richard98765] 16/12/2014 18:11

Tomorrow completes a yield of 6.74% for the year for me. Happy to hold for the long term with this

[aileron] 16/12/2014 08:25

Thursday Dec 18th ex Dividend day. 90p/share.

[gargleblaster] 08/12/2014 22:44

Fuller IC write up from last Friday

Further evidence, if any were needed, of the effervescent London housing market came with these half-year figures from London-focused housebuilder Berkeley Group (BKG). Operating profit rose by over three-quarters to £300m and the underlying pre-tax return on equity jumped from 25 per cent to 29.2 per cent.

Half-year sales totalled 2,294 units, of which 1,372 were sold in London and the south east at an average price of £649,000 a unit. It also disposed of 534 properties from its rental portfolio to M&G Investments - mainly outside London - at an average selling price of £197,000 each, resulting in an overall average selling price of £350,000. Despite a £3.4m increase in overheads, a change in the sales mix also lifted the underlying operating margin from 20.7 per cent a year earlier to 23.3 per cent.

Shareholders were rewarded with another 90p a share dividend, too, which leaves 90p outstanding in order to meet the first milestone of returning 434p a share by September 2015. Thereafter, a further 433p is targeted for payment by September 2018 and another 433p by September 2021. Furthermore, the group has significant visibility over future cash flow, with money due on forward sales up by £419m at £2.69bn. Given the strong cash generation, Berkeley hinted that this could lead to further dividend payments or a share buyback programme. Land holdings rose to over 24,000 plots, with a future anticipated gross margin of £3.2bn.

Analysts at UBS are forecasting full-year cash profit of £375m and diluted EPS of 188p (from £280m and 140p in 2014).

BERKELEY GROUP (BKG)
ORD PRICE: 2,641p MARKET VALUE: £3.58bn
TOUCH: 2,637-2,644p 12-MONTH HIGH: 2,808p LOW: 2,033p
DIVIDEND YIELD: 6.8% PE RATIO: 9
NET ASSET VALUE: 1,159p NET CASH: £148m
Half-year to 31 Oct Turnover (£bn) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2013 0.82 170 100 90
2014 1.02 305 179 90
% change +24 +79 +79 -
Ex-div: 18 Dec

Payment: 23 Jan

IC VIEW:
Berkeley's shares rose over 5 per cent on these figures, more than offsetting a small decline following news of an increase in stamp duty on higher-value houses. However, Berkeley's exposure to properties priced in excess of £2m is only around 15 per cent of gross development value and a third of these are pre-sold. The shares have risen sharply from our long-standing buy tip (1,691p 13 Dec 2012) and now trade on 2.3 times net tangible assets, which, historically, might look expensive. But with such strong forward sales, and a hefty dividend for at least the next seven years, we're sticking with our earlier advice. Buy.

[philo124] 08/12/2014 08:19

Raised to 2900 from 2830p by UBS.

[r ball] 05/12/2014 08:51

Could be time to top slice. Some headwinds coming up but underperformance re: PSN and BVS could provide support.

[aileron] 05/12/2014 08:44

And 90p div. It's simple isn't it?

[philo124] 05/12/2014 08:34

Onwards to 2800p?

[sogoesit] 04/12/2014 13:37

Interesting comments on demand.
Purchaser's behaviour may vary significantly to our own, broad, perceptions and biases. For example, I am trying to downsize in the London area and currently two things are happening (i) noone is interested in purchasing my existing property because of "mansion tax" uncertainty and (ii) as explained above the new SDLT has hit me for the downsize and I am deterred. Who knows how others think and how the "bulk" of the market will behave... only time will tell. So I look forward to tomorrow's comments.

BTW, BKG has substantially underperformed against PSN (I hold both) since August.

[pastybap] 04/12/2014 12:46

I would suggest that in the lower to mid range of property prices, the price elasticity of demand would be much higher. Perhaps 1-2m might be fairly elastic but an over 2m property transaction is likely a relatively lower percentage of a buyer's budget and fairly inelastic. I imagine we might get comment from BKG tomorrow on the new stamp duty rates.

[hpcg] 04/12/2014 12:24

Makes no difference at all. Anyone who can spend a million quid on a house, even if trading up, is going to have 100,000 in the bank.

[barnesian] 04/12/2014 12:12

It is hard for us to estimate the impact of a 1.8% cost increase (£36K on £2000K) on aggregate demand and longer term earnings and dividend prospects for BKG. We don't know what the price elasticity of demand is.

But BKG will have a fairly good idea. Perhaps we will hear more tomorrow from BKG with the Half Years Earnings Release?

[gargleblaster] 03/12/2014 17:49

This snip-bit from IC.

Shares in housebuilders were generally higher, although Berkeley Group (BKG) shares lost ground, reflecting the builder's exposure to high-value properties in London.

imho this is the Tory party attempt to head off the "mansion tax" that labour are threatening. If they are being seen to be hard on those with expensive homes - Milliband may either back off the mansion tax, or he will be seen to be hitting the wealthy twice. In the longer term this may be the lesser of two evils as far as BKG are concerned.

[sogoesit] 03/12/2014 16:32

No worries, gre.
Politics is all about presentation... as we have experienced about immigration "figures" debate in the last few years and the recent EU bill for £1.8bn!!!

[gre] 03/12/2014 16:27

Sogoesit, I've amended my original post and agree with your calculations. I also agree that the people paying between £925,000 and £2,000,000 will be hardest hit by the changes. I wonder if the Treasury has really thought this out properly.

[sogoesit] 03/12/2014 16:13

Thanks for that gre. My calcs. in summary, were:
For a property at £1.45m: old SDLT = £72,500; new SDLT £88,750 thus an increment of 22.4%
For a property at £1.75m: old SDLT = £87,500; new SDLT = £123,750 thus an increment of 41.4%.
The new SDLT figures are banded. Have I erred otherwise?

I take your point that to a £1.75m or even £2m+ purchaser a £36,000 (in the above case) increase "may not be much" (at an overall price increase of 2%)... but I do think it will affect the profitability of "premium" housebuilders. All IMV.

As an aside, I just called a developer in London and asked if they would negotiate on prices due to the change in duty.... they said Yes.
Draw your own conclusions.

EDIT: For a £2.1m purchaser: old SDLT = £147,000; new SDLT = £165,750 an increment, as you say, of 12.75%.
Conclusion: the banding means that the middle £925,000 to £2m purchasers are hit the most.