Watkin Jones Share Discussion Threads

[bothdavis] 12/10/2022 12:07

Maybe they will.....at least if you pay upfront you know the cost?

[hybrasil] 12/10/2022 12:05

Of course they will but they won’t get funding the way wsg works.ie their supposed capital light model simply won’t work.
The effect won’t be seen in the results here for about12 months I think

[bothdavis] 12/10/2022 09:24

And yet houses, student accomodation, offices will still need to be built.......

[hybrasil] 12/10/2022 07:34

Read this mornings rns from palace capital where I have some shares.
I know it’s commercial as opposed to student but values falling.
Mr baileys statement yesterday will mean another jumpy day in the markets methinks

[hybrasil] 11/10/2022 22:12

thank you m_kerr

I waded through 144 pages of the annual report trying to find the exact situation on those leases.

ESG and governance seem to occupy more pages than money !

I accept the model will turn.

The interesting thing about today is that 3 million shares were sold at 80p or below which is 20% less than the float price in 2016.

[m_kerr] 11/10/2022 18:15

the commercial property market had already slowed down markedly post the UKR / RUS conflict. it's now ground to a virtual halt, as buyers cannot buy at prices that make sense with much higher borrowing costs. no-one's going to be selling unless the sales are forced, plus gearing is largely quite low in the reit sector.

long term the need for PBSA and BTR (particularly BTR) is still clear. there's a housing crisis with 4 million new properties needed, and more building of that sort of property will help alleviate the housing crisis. the prices may be lower, the yields higher, but that's a problem for landowners, which isn't the business model here. just saw a news story where students simply cannot find any accommodation in major cities like glasgow, edinburgh and bristol and are considering dropping out as a result. contrast that to empty offices where landlords have to offer well located property, have rent free periods and free fit outs just to get someone through the door at previous rent levels.

on the net debt - they mostly run a net cash position financially. you are referring to the sale / leaseback of certain properties, where they effectively guarantee the rent for the asset owners for the term. so they are sub letting the properties and collecting the rent. 4 of the 6 properties in question have leases that expire on or before 2034. and the remaining two on leases until 2051/2.

[sphere25] 11/10/2022 16:08

Got the first short term bounce attempt trade here wrong.

Had a second and final attempt just now at 80p. Big buyers appearing at 80p including a 50k iceberg - highly irregular for WJG.

It is due a technical oversold bounce.

Stop at under 76p.

All imo
DYOR

[horndean eagle] 11/10/2022 14:43

The family were keen to get out asap iirc. I had a discussion with a friend and said would you want to buy ESP or WJG and I put forward the various arguments as to buy an asset backed student property owner or a student property developer with barely any asset backing. In a 5 or 10 year bull market for asset class which would do better and if you were to assume a market downturn which would do worse. I suggested ESP would have been a better choice but they were morons and did a terrible job but would have done materially better in the other student property listed plays.

[hybrasil] 11/10/2022 14:26

Just had lunch with a large developer.
My theory was confirmed. The model is shot for now.
The family was wise. If you look at the top of this thread you will see in 2017 they had 25%. It’s now 5%.

I’m still doing my numbers but I think fair value will be in the 40-50p range

[riverman77] 11/10/2022 13:51

hybrasil - you are correct that with the sell off in bonds and equities, institutional investors will be looking to add exposure there. However they will also want to stay well diversified, so will still want to keep exposure to a range of alternative assets - I think a bit early to say the forward funded model is over. Build to rent in particular has attractive long term tailwinds which should continue to be attractive to institutional investors.
If rates stay permenantly higher (a big if, but possible) then institutions will be looking for a higher yield, This might hit profits for the likes of WJG, although should be mitigated by the fact that they'll be able to buy land more cheaply (hence higher yield on cost). Also worth noting that rents rising sharply so this should also improve yields on BTR projects.

[christw1234] 11/10/2022 12:54

This Government needs to change the planning regulations for housing.
It can take WJG up to 4 years to gain planning approval’s.
Due to the present economic climate the whole world can change in that time

[sunshine today] 11/10/2022 12:53

This is how quickly you can lose 50% of your share price on your FIRST PROFIT WARNING.



INL and WJG are the first two.

[hybrasil] 11/10/2022 12:50

You are missing my point. I am not comparing the companies. I am simply saying that a institution is more likely to get yield differently ie by buying shares rather than property.
Look at this mornings announcement by the Bank of England. Bond yields are rising.
I spent ages looking at the past of wsg.
It’s first student development was 1999. Mine was 2001
The model of forward funding is I suspect more or less over for the moment

[goodpick] 11/10/2022 12:29

Riverman this has been explained to Hybrasil a few times now and the same posts are getting repeated by him.

[riverman77] 11/10/2022 12:16

Completely different companies - UKCM is a REIT which holds properties on its balance sheet and collects rents (rents make up most of its returns). WJG is a developer, which forward funds developments to reduce balance sheet risk. Most of its returns ultimately come from buying land, getting the necessary planning permissions, and then selling on for a profit. Not saying one is better than the other, but you are comparing apples with pears.

In some ways WJG should be better placed than REITs since they don't hold huge amount of properties on the balance sheet, which are likely to be marked down. Most REITs are geared so this will amplify the mark down. In contrast, WJG have 75m net cash so should be able to buy up cheap land if prices fall.

[hybrasil] 11/10/2022 11:54

My point is that as we speak the shares for example in UKCM yield over 6%. Its well managed with gearing of less than 14%.

With no Transactional cost to speak of surely a fund manager will buy it or similar with the flexibility entailed rather than the assets produced by WSG.

[christw1234] 11/10/2022 11:29

Personally I would much prefer income producing assets on the balance sheet.
A property company can then
leverage against the assets when yields move out.
Any company will soon burn cash if they are light on collateral for security.
WJG will ride the storm.
They are a well managed company with vast experience in the Student/BTR property sector.

[hybrasil] 11/10/2022 10:58

Look at the RNS this morning. Oh dear.

Its now 25 % down in less than 10 days

Still wading through the numbers.

In the half year report I see that para 13 of the Notes to consolidated financial information shows net debt at £99,224,000.

The watkin Jones trusts only own about (as of June) 5% of this. There seems to be no other family interest
They are the people who have done well here. They have taken over £50m off this table.

Its seems to be a classic. Bring in a former army officer.

Spec building doesn't work like that.

[horndean eagle] 11/10/2022 10:43

I find it really difficult to fathom how everyone who seems to think nav, capital light etc is better than having asset backing. With a developer you have to keep running on that treadmill to keep the lights on. With asset backed you have rental income to cover that. The sensitivities are pretty stark here. If yields blow out 100bp then wjg is loss making. The market is pricing other property stocks as have a blow out in yields of higher than 100bp. at 150bp wjg is heavily loss making and if yields dont come back then there is real risk of them going bust. To counter that they dont have a huge land bank and some forward sales but the treadmill analogy applies.

[hybrasil] 11/10/2022 10:38

In the middle of doing my homework.
Just reading the admission document.
Why did mark Watkins Jones leave (he was the 9th generation)?

[riverman77] 11/10/2022 09:53

On the discount to NAV point - it's much less relevant metric than it is for traditional housebuilders since WJG forward sell their properties - in other words the majority of their projects will not be held on their balance sheet.

[hybrasil] 11/10/2022 08:49

I still haven’t finished my homework and I take your points that this is undervalued on an historic basis but my reasoning is that it must trade at a discount to nav.
I am seeing first hand (and as explained I have knowledge of student housing) the difficulties in the market place.
This is all about yield. And if institutions can get higher yield elsewhere they will leave this marketplace

[divmad] 11/10/2022 08:35

Just started a position here at 78p for 20k. Looking through the housing cycle downturn to the next recovery.

[riverman77] 11/10/2022 08:28

Also worth noting that they should be able to to pick up cheap land using their hefty cash balance - this should help offset margin compression from higher build costs.