Countryside Partnerships Share Discussion Threads

[rimau1] 15/5/2019 07:58

Interesting analysis Bogdan. I am not quite so bullish in the short term, they flagged an H2 weighting during the recent trading update and I would also expect some short term margin contraction - well flagged softer markets and sector wide input cost inflation could more than offset cost efficiencies in the short term. Very excited about 2020-21 when the value on offer here really plays out. For 2019 Peel Hunt have lower % growths. EPS full year around 39 so maybe H1 of 19 would be nice.

[blueclyde] 15/5/2019 07:47

Hi Bogdan. Thanks for confirming what I was thinking! The acquisition so further fuel huge growth it just remains to be seen how much of the 40% growth in properties falls into percentage profit increase. Even if it is 20% then I believe the share price currently on a PE of 10 should quickly move by as much to maintain that PE. I also see the dividend of 10p last year covered by 30p of earnings. I don't see them needing all that cash as they ramp up out put they coulda easily make the dividend 20p what would also support a share price north of 400p too.

[bogdan branislov] 14/5/2019 22:56

Well, I have been tasking a close look at it, several close looks in fact. At risk of stating the obvious, if the margins are maintained, which is expected with the more efficient factory production of timber frames ramping up, then the H1 profit growth should not be far behind the output growth. There was a big surge in output growth in H2 last year, so it is unlikely that output growth for the full year will be as high as 43%, probably more like somewhere in the mid 30s %. Conservatively I am assuming profit growth of over 20% for the year, although this would require a fall in margins that appears unlikely - but I can't quite bring myself to assume annual profit growth of over 30%. The profit growth % added to the divi for the year looks like it will be at least 25, about 2.5 times the trailing year PE ratio. This is extraordinary, the sum of growth and divi being half the trailing PE is generally seen as fair value, growth plus divi the same as trailing PE suggests an exceptional bargain. I have not seen a valuation ratio like this for a solid, non-tech FTSE company since Barratt sold for c£1 per share in 2010. Clearly Brexit, trade war fears, Corbyn government fears and general negativity towards house building and construction have all contributed to this extraordinary situation. There may be another factor, a very temporary factor, let me explain. I recently e-mailed one of the editors of a leading national newspaper about CSP - I can't be any more specific for confidentiality reasons. He called me back a few days ago, said he had read through my valuation assessment and thought the under valuation was just compelling. 'But what was the company called again' he asked, 'was it Countrywide?' !!!! He quickly corrected himself to be fair but you take my point, there is no name out there more toxic than Countrywide right now, the complete antithesis of Countryside Properties. I can't see the rate of growth slowing with nearly 10,000 new builds signed up in H1 alone, for partnerships alone, this is over 4 times the H1 output - extraordinary. Bogdan

[blueclyde] 13/5/2019 19:34

Anyone care to take a guess at the half year EPS figure this week?

[bogdan branislov] 01/5/2019 07:41

KB, interesting bit of history you point out there, could be a pattern. Yes I contacted CSP yesterday. They are usually very good at replying, although the nature of the question, much along the lines of my post below, is likely to take a couple of days for CSP to respond to. Bogdan

[king_baller] 30/4/2019 17:18

Bogdan. A quick google search shows that she suddenly resigned from Quintain in 2012 within months of being promoted from finance director (which she had been for 14 years) to deputy chief executive. I agree the change from CFO to COO of such a large/growing company is unusual. Potentially she has just taken a role that didn’t suit her? Would be good for some clarification rather than guess work though, have you contacted CSP?

[bogdan branislov] 30/4/2019 10:46

Rebecca Worthington's resignation. It is unusual for someone to move from CFO to COO, very unusual. Add to that the 43% year on year growth, add to that the new build agreements for the half year being over times greater than the increased build rate - there is a lot of operational pressure within CSP at the moment due to the rapid growth rate. There must be someone out there who can give us some more information as to why this resignation has happened. It does not surprise me, most CFO's stepping into the COO role within a rapidly growing company would struggle I suspect, but I don't like not knowing what happened. If anyone has any more information could they please inform us. Thanks, Bogdan

[bogdan branislov] 23/4/2019 10:02

Perhaps. I recall reading a long time ago that investing the 'if' is much easier to determine than the 'when'. i.e. a stock like CSP will almost inevitably go up unless their is a dramatic reversal in the story, but it is very hard to predict when the big price rise will come. When I look at the public information issued on CSP now, particular following the recent half year update, it is extraordinary that the price is where it is. I recall Dart Group in the 2013, selling for about 70 pence a share. The PE was well down into single figures, the past and projected growth about 15% pa and the cash surplus only slightly below the market cap, although some of that cash was forward bookings, services not yet provided so adjusting, cash was about half market cap. PE was slightly lower than CSP, but the growth was less than what looks likely for CSP now and Dart's, airline, holiday company and road haulage mix was higher risk than CSP's model. Overall I would say that CSP is even more compelling and in 2013 there were more bargains around making CSP even more standout in today's market. The point is it took a while for Dart to get going even when the case was overwhelming, but when it did, the price kept rising for years. Before the price move, analysts and BB posters could not accept that sometimes you just have to wait, they seemed to think there must be a reason, something that we had missed. Dart kept appearing on IC growth screens as the most undervalued low risk stock, as CSP does now. Then having ignored catalyst after catalyst, the price began to rise. It has more than 10 bagged since. I sold having made c150% profit, silly me! I won't make the mistake of selling too soon with CSP. I will stick my neck out and agree with you that the full half year results will make a real difference, CSP cannot be ignored for much longer, the buy case is just overwhelming. Bogdan

[blueclyde] 21/4/2019 13:28

Perhaps we will see the share price move substantially with the results in May. Would be surprised if it didn't move up to it's all time high in the 380s by then.

[bogdan branislov] 20/4/2019 22:42

Although my ten year SIPP total gains of just over 1,000% have made the effort of investing worthwhile, my gains would have been higher if I had not made the same repeated mistake. I bought Dart Group for c70 pence on 2013, selling for just over £2 a year or so later. Back in 2010, I bought Barratt for about £1, selling for about £2.50 in 2013. Need I say any more! I have a tendency to sell before a stock double bags, even when the valuation remains attractive. Top skimming, i.e. reinvesting some gains elsewhere would have made some sense, but selling out completely in the two examples above cost me a lot of gains. I am determined not to do this with CSP as the price moves up. I still want some skin in this game when we reach the 4 bag point, which I am increasingly confident that we will within just a few years. Bogdan

[bogdan branislov] 20/4/2019 17:58

IC reader post: I have to admit to being far more interested in news that will allow me to make large gains over the medium term. To this end, the story of this week seems to have pretty much passed under IC's radar.

Countryside Properties on a trailing year PE of just over 10, was forecast to generate gains for each of the next 2 financial years of about 11% per annum. The projected increase in build rate linked to the maintenance of CSP's very high trading margin when viewed from a very capital light business model, made these forecasts appear conservative indeed.

Thew H1 trading statement came out last week. H1 completions up 43% year on year. Forward order book up 49% year on year. Whilst the total completions were 2,362 for the period, newly obtained business for the period, on the Partnership side of the business alone, was 9,893 additional plots. That is, the new business obtained in H1 alone was over 4 times the current build rate, which in itself was 43% higher than the same period last year.

In case anyone had not noticed, CSP is not waiting around for Brexit, or Trump's trade wars or the EU slowdown to resolve. CSP is simply doing the business and is very under valued.

Doug

[blueclyde] 18/4/2019 12:59

Thanks for the posts. It does look like good value with good growth prospects so fingers crossed!

[bogdan branislov] 17/4/2019 23:53

Politically uncertainty and the fact that house builders in general are strongly suspected of not making sufficient cost provisions for higher cost replacement land against current sales - boosting short term profit levels, but taking a big margin risk later in the cycle as the higher cost of the replacement land will have to be borne in full down the track. Cyclical ineptitude is almost an accepted tradition for conventional house builders. What has this to do with CSP given their predominantly partnership based model? Not much, but the market still lumps CSP in with other house builders and is only starting to wake up to CSP, as the almost complete lack of previous activity on this BB demonstrates. In terms of price target. I use a Neff total return for this type of company - (average annual growth rate forecast for the nest 2 years + current yield), divided by the cash or debt adjusted trailing year PE ratio. A kind of inverted PEG but factoring the divi into the total return. CSP, based on the official forecasts, has a Neff ratio of about 1.5. A Neff ratio of 0.5 is usually considered fair value, neither attractive nor over priced. O.7 or higher is getting interesting, above 1, which is a demanding threshold, suggests a real bargain. 1.5, when the business model is sound is compelling. But of course the 1.5 for CSP is nonsense. The broker forecasts are hugely conservative for CSP, the real Neff ratio for CSP is probably well above 2. The price could go up 150% now and while CSP may, at 150% above current price, at first glance look costly relative to conventional house builders, when you actually drill down into the numbers and CSP's growth profile, CSP would still not be expensive at 150% higher than the current price. CSP should five bag over the next 4 years or so. Given the pipeline, the growth must continue as the local authority partners will want their houses built, it is not like sitting on a land bank. Best for shareholders if the share price steadily begins to catch up to its fair valuation, the fair value obviously increasing year on year with the growth, without ever over shooting it as the expansion continues. Say, 70% share price growth this year and next, compounding, followed by say, 50% per annum compounding for each of the 2 years after that, that would get us there nicely. Cloud Cuckoo you may think! Well, with 10 years of SIPP investing this coming May, my gains have tipped over the 1,000% mark now. If there are relatively low risk growth bargains out there, I do tend to find them. CSP is as compelling as they come. Bogdan

[bogdan branislov] 17/4/2019 23:15

The CSP growth rate is extraordinary, but very much in line with the growth in Partnership build agreements. Given that margins are expected to hold, the profits for this year look like being way ahead of the forecast - under promise and over deliver, this intentionally seems to be the approach. CSP is my largest holding by some way now, nothing else out there compares, even comparing hypothetically to the 2009 market, when bargains were more common, CSP at this price relative to earnings and earnings growth would have been a stand out opportunity. The former CFO's move to COO did surprise me at the time, ops director people just tend to be very different in personality type to financial directors. There was that slightly strange issue to do with CSP's ROCE calculation for the last full years results. There is no statutory approach, but IC strongly felt that not including the intangibles in their ROCE calculation, which lifted the ROCE from about 25% to a slightly daft 37%, was not in line with the way the sector would normally make the calculation. CSP were very open about how they did this, there was nothing clandestine at all, CSP are very conservative in their forecasts and their is no statutory method for calculating ROCE, so not a big deal at all in the scheme of things. But CSP did take some sharp criticism from a large private investor about their ROCE approach. The criticism was along the lines of given how strong CSP's results, growth and overall statutory financials are, why on earth did they feel the need to 'torture' the ROCE data in that way, it was so unnecessary. The response was prompt and considered and came back from Director level. Probably no connection here, but who knows. For every company, if you look hard enough, you will find something that you would prefer had been done slightly differently. Part of the skill is knowing what to overlook and what not to. Often the willingness and promptness of the company to discuss and engage with the issue is very telling. Bogdan

[blueclyde] 17/4/2019 22:55

What are people thinking price target wise? It is currently very cheap and the numbers appear to be growing rapidly with over a billion in the pipeline. Struggling to see how a company growing this quickly can be on a price to earnings of ten and have such a decent dividend?

[eaglebeagle] 17/4/2019 22:24

I think it most likely that since was CFO until October 2018 ( to guide them through listing) that the COO operation was either an ambition that was not fulfilled, or the handholding of the CFO was complete. I suspect little else but agree clarification was required. But it could be purely personal and even the slightest hint may be harmful in such circumstances. Let us hope all is well.

[minerve 2] 17/4/2019 21:05

Well, they really should have clarified. Need to watch this closely.

[standish11] 17/4/2019 21:02

Intriguing in that the chairman praises the outstanding contribution she has made over the past four years and wishes her every success in the future. On the other hand she is leaving with immediate effect which is unusual when no adverse behaviour is an issue. I hope she is not having to leave on health grounds .

[minerve 2] 17/4/2019 18:14

Yes.

I wonder why the COO is stepping down. She has only been in the position since Oct 2018. Warrants further investigation.....

[standish11] 17/4/2019 10:17

Encouraging trading update today and the shares have responded positively. I am surprised that the company doesn't have more followers on the BBs

[bogdan branislov] 22/11/2018 08:08

These results just could not be stronger. To have a net cash position after funding both organic growth and an acquisition is remarkable. To have such margins when predominantly operating on a capital light model (i.e. capital not tied up) is very healthy. The ROCE employed is exceptional. The growth in contracted builds, the earnings growth trajectory all linked to a cash adjusted PE of about 8. The business model is clear, coherent, plausible and sustainable. 40% of my total holdings now in CSP, opportunities like this do not come around very often. Bogdan

[bogdan branislov] 12/10/2018 11:28

The results, particularly cash build up in light of the growth rate, are compelling - growth usually drains cash. It is not just PE value but growth and quality and bid pipeline. The near 30% ROCE means that they can grow and acquire without balance sheet pressure, a very rare thing. Sometimes sentiment diverges from reality and fundamentals like this, but not for long I suspect. This is when the true investors are revealed, those who ignore the sentiment and place their confidence in the fundamentals, which could not be better. Bogdan

[olliemagern] 12/10/2018 10:41

Sentiment seems to be against the outstanding Countryside CSP at present, 280p is oversold. They have 139p net tangible assets and will earn another 123p over the next 3 years to Y Sept 2020.
If houses stop selling they can bring forward the partnership 4 year scheduled pre sold builds for Sigma Capital, PRSR Investment Trust, etc. Other House builders can't do this.
Just to recap, CSP Y Sept eps are :-
Y15 5.5p

Y16 16p

Y17 28p

Y18f/c 36p

Y19f/c 40p

Y20f/c 45p

[olliemagern] 10/4/2018 12:08

Expect more orders from Sigma capital for house completions in 2019 and 2020. These houses are pre-sold to the rental market via PRSR investment trust.
Plus the circa £100m acquisition of more Ebbsfleet land from the govt to build a further 1000 houses in 2019 and 2020. With govt pressing for more affordable houses that are urgently needed.

This should ensure Countryside continue to lead the sector growth for at least the next three years.