Watkin Jones Investors - WJG

Watkin Jones Investors - WJG

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Stock Name Stock Symbol Market Stock Type Stock ISIN Stock Description
Watkin Jones Plc WJG London Ordinary Share GB00BD6RF223 ORD 1P
  Price Change Price Change % Stock Price Last Trade
-0.40 -0.2% 199.60 16:35:04
Open Price Low Price High Price Close Price Previous Close
195.00 195.00 207.50 199.60 200.00
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energeticbacker: Investor's Champion comments that they like the lower risk forward funding model followed by Watkin Jones and there appears renewed appetite on the part of institutional investors to fund the sort of developments they construct. New research on Investor's Champion.
rat attack: Article from Investors Champion Despite the challenging conditions, full year results from the leading developer of student accommodation were encouraging. With a significant opportunity in Build to Rent accommodation and institutions willing to provide funding, Watkin Jones looks well-placed to benefit from a supportive market. Watkin Jones (LON:WJG), the UK's leading developer and manager of residential for rent with a focus on the build to rent ('BtR') and purpose built student accommodation ('PBSA') sectors , announced decent results for the year ending 30 September 2020. While revenue fell 5.5% to £354.1m, primarily as a result of forward sales of developments being deferred due to COVID-19 uncertainty, that looks a pretty good result in the circumstances. Adjusted operating profit was only 7.1% lower at £51.7m with the impact of disruption on operations minimised and additional construction costs substantially mitigated, and planned deliveries for the year all completed. Exceptional costs of £20.5m, including £14.8m in relation to remediating cladding on a number of past developments and £5.7m of additional costs in relation to COVID-19, saw statutory profit fall 47% to £25.3m. There seems some inconsistency in their communication of the impact of the pandemic, with additional costs relating to this simply being treated as ‘exceptional’. With all Government financial assistance of £0.8m repaid at the start of 2021, management is able to propose a full-year final dividend of 7.35 pence. The operating cash inflow was £38.3m and free cash inflow £32m, boosting period end net cash to £94.8m of net cash, up from £76.8m at 30 September 2019. With £65.0m undrawn on their revolving credit facility they have plenty of fire power. Management confirmed a good start to the 2021 financial year, with new forward sales and developments progressing well. Watkin Jones reports across 4 business lines: BtR, PBSA, Accommodation Management business (Fresh) and Residential. BtR made a significant contribution to performance, with revenue up 21% to £94.0m and gross profit £14.9m, representing a margin of 15.8% In BtR development 928 apartments across five sites have been forward sold for delivery over the period to the 2022 financial year (all date reference here are to September financial year ends). A further three sites (722 apartments) are currently in negotiation for sale for delivery over the period 2022 to 2023. They have a total secured BtR development pipeline of 4,466 apartments across 13 sites, for delivery between 2021 and 2025, suggesting decent visibility.
investor0109: Progressive Equity Research published this morning- confirms why confident on WJG. Full research found on Progressive's website (and on link kindly provided by 'rat attack', though an extract from summary here: 'Watkin Jones in brief: low-risk, capital-light in growth markets The Group, admitted to AIM in 2016, in our view offers a unique low-risk, capital-light development and asset management model for private and student rental. It develops BTR and PBSA schemes, largely forward-funded by institutional investors, which acquire sites from WJ with the benefit of planning and then pay for the works monthly as development progresses, thus reducing capital tie-up for WJ. The Group also provides an accommodation management service through its Fresh Property Group (FPG) business, which manages both WJ and third party developed assets, and operates a more traditional housebuilding business focused on the North West. We believe the Group should benefit from continuing growth opportunities in new student accommodation, has ‘early mover advantage’ in BTR and this is all tied together by FPG in what we have defined as a ‘virtuous circle’. For more details, see 9 June 2020 initiation, Build-to-rent ‘comes of age’. Themes: opportunities knock ? Opportunities in land market – aided by planning changes. We see WJ in a similar advantageous position as some of the most successful specialist residential developers, such as Berkeley Group, which have preserved cash and now see significant opportunities from land owners in financially-challenged sectors such as retail and leisure. We believe WJ could benefit from recent changes to planning rules, allowing for vacant office and retail properties to be fast-tracked for residential use. ? Institutional investors return. Institutional investors have underpinned the Group’s capital-light growth model, by acquiring developments on a forward sale basis, in which they pay for the land and the development works as they progress. The Group has indicated returning demand for both BTR and PBSA after a hiatus during Covid. ? Build-to-rent. As we argued in our initiation note, we expect long-term growth in BTR, fuelled by demand from renters, either economically or for ‘life-style217;, and from investors, attracted by income prospects, while other sources of yield are diminishing. ? Student demand remains high despite Covid challenges. Despite worries that Brexit and Covid may deter university entries, particularly from overseas students, UCAS has registered a new record in the number of applications, from both home and abroad. Whilst remote teaching by universities and uncertainty during the pandemic could reduce the number of students choosing to study away from home in the current year, in our view it remains the preference of the majority to study at their university of choice and so we expect lettings to recover to normal levels post-Covid.'
clausentum: From the November update: "-- Intention to pay a full year dividend for 2020 in line with our policy of 2.0x cover, reflecting our strong cash position, subject to there being no material deterioration in market conditions". IMO if they follow through with this there should be a higher share price A significant dividend and capital light model make this company ideal for risk averse income investors.
goodpick: Investor 0109 - would personally love that ( - : £2 initially then definitely £2.50. On a dividend of 8.8p per share @ 3.5% that’s just under £2.50. The 3.5% divi yield was where it was hanging pre Covid and that was based on the 10% per year growth in divis. The only thing is that there needs to be a lot more certainty around 2022/23 and 2023 / 24 and onward earnings which will rely on more forward sales being confirmed. The Brookfield forward sales announced in the update are encouraging but need more. What is also encouraging is the growth in the build to rent land bank. So for that reason £2 very very soon is a no brainier then with expected news towards £2.50. In 2 years time if all goes well £3 is not impossible if they can keep on growing dividends.
rustle2: 2theduke, progressive research note hxxps://www.watkinjonesplc.com/~/media/Files/W/Watkin-Jones/documents/wjg-20201106-revived-investor-appetite-fuels-property-pipeline.pdf
goodpick: The cladding costs are a one off and not necessarily the main challenge for WJ. It’s worth looking ahead. Normally by now they would have confirmed by RNS a number of high profile forward sale deals into 22/23 23/24. The silence is ominous. The fact that their institutional investors are likely to be very nervous about investing more while rental occupancy hovers at around the 60% mark is going to be much more critical. This is a project business without automatic recurring revenue - not a subscription one - so forward sales are a health check kpi on the business. Student Accommodation makes up the vast majority of the its income and profit not build to rent. The Student development model worked well before as it had a superb leading management platform in Fresh providing an end to end service which was attractive to clients. Is the Build to Rent platform super standard yet ?
rivaldo: The IC says Buy in its annual review of the AIM top 100 companies by m/cap: Https://www.investorschronicle.co.uk/shares/2020/05/14/the-aim-100-2020-40-to-31/ "38. Watkin Jones Watkin Jones (WJG) is the UK’s largest developer of purpose-built student accommodation undertaken on behalf of institutional investors such as CBRE, AIG and L&G, which have forward purchased developments. As well as reducing development risk, that capital-light operating model has allowed the group to generate impressive returns on equity, which last year came in at almost 30 per cent, after adjusting for exceptional items. At its capital markets day in November, management had targeted delivering around 3,500 student accommodation beds a year, up from 2,666 in 2019. However, following the implementation of social distancing measures, the group has stopped work on its construction sites, which will drag on completions. While management expects to report March half-year revenues and earnings in line with its expectations, it has withdrawn future financial guidance. It also said it does not intend to pay a half-year dividend. However, during the first half Watkin Jones made progress on boosting its forward sales, including a 348-bed scheme in Bristol, for delivery in FY2021. That took its forward sold and secured student accommodation development pipeline to more than 7,000 beds. There is the risk that institutional demand for student accommodation assets will dry up over the next year, depending on how university attendance levels are impacted by social distancing measures. The group has also entered the build-to-rent market, with developments making their first material sales contribution of £74m last year. After completing the first 159-unit build-to-rent development in 2019, the group had intended to increase annual delivery to around 1,000 units by FY 2023-24. Watkin Jones has forward sold all of its 2020 developments and eight out of 10 of its developments scheduled for delivery in 2021 to institutional partners, which provides a certain degree of cash flow and earnings visibility. Management expects to incur costs in the range of £12m-£15m over the next two to three years for remedial work to comply with government advice on building cladding. However, it has ample liquidity, with £71m and a net cash balance after deducting site-specific loans of around £36m, with an additional £31m in undrawn debt from its revolving credit facility. Buy."
rivaldo: Great tip update in today's Mail on Sunday which essentially concludes that investors new and old should still be buying: Https://www.thisismoney.co.uk/money/investing/article-7929579/MIDAS-SHARE-TIPS-UPDATE-student-digs-tip-Watkin-Jones-really-grade.html Conclusion: "Midas verdict: Watkin Jones was recommended by Midas at £1.09 in 2016, just a few weeks after it floated. Today, the shares are £2.48. Sales, profits and dividends are growing steadily and the stock yields just over 3.5 per cent. The stock has had a great ride over the past four years but it should continue to deliver for both existing and new investors."
cordwainer: in case clicking the mouse too much effort vs scrolling, here is Mr S Thompson (IC): Watkin Jones (WJG:241.5p), a construction group specialising in purpose-built student accommodation (PBSA) and build-to-rent (BtR) housing, has delivered a total return to shareholders of 162 per cent since I suggested buying at the IPO, and with good reason ('A profitable education', 3 Apr 2016). I flagged up today’s record annual results when the share price was 214p in a detailed analysis (‘On solid foundations’, 11 Nov 2019), and raised my target price to 275p to reflect the group’s solid earnings visibility, and strong fundamentals supporting both end user and investor demand across all parts of its business. Bearing this in mind, chief executive Richard Simpson noted during our results call that [investor] sentiment has definitely lifted since the general election as institutional investors look to invest capital in a more benign political backdrop, adding weight to Knight Frank’s forecast that total investment in PBSA is set to rise from £51bn in 2019 to £65bn by 2025. It's good news for capital flows into BtR, too. All 2,609 of the group’s PBSA beds under construction for the current financial year are forward sold, and a further 2,376 of the 3,253 beds for 2020/21 are either forward sold or in the hands of solicitors. Add to that a planned ramp up in BtR construction projects – the group has nine developments encompassing 2,312 apartments of which 1,102 units are already forward sold – and it’s easy to see why analysts at brokerage Peel Hunt expect current year adjusted earnings per share (EPS) to increase from 16.7p to 18.2p, rising to 21.1p in 2020/21. Analysts at Jefferies are even more bullish. Moreover, with the group holding net cash of 30p a share, and the capital-light business model generating an eye-watering return on equity of 29.9 per cent, expect the progressive dividend (the board declared a 10 per cent hike in the payout per share to 8.35p) to increase to 9p a share this year and could be north of 10p a share in 2020/21. Buy.
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