Watkin Jones Share Discussion Threads

[skinny] 03/11/2017 12:56

A new high @239.50p

[douglas fir] 02/11/2017 10:13

Ready for the start of term
Published: Nov 02 2017
Watkin Jones’ year-end trading statement outlines its successful completion of all 10 planned student accommodation developments for FY2017, and reinforces the excellent visibility it enjoys due to its strong development pipeline and robust forward sales position. The company operates in two of the hottest areas of residential real estate, namely purpose-built student accommodation (PBSA) and build to rent sector (BTR).
The largest division of Watkin Jones has again performed well in 2017 with 10 developments being completed as planned (3,314 beds). Looking into 2018, 10 planned developments (3,415 beds) have been forward sold and provide the company with significant visibility. The 2019 position is also strong with five developments (2,959 beds) already forward sold. In addition, the company has secured an additional eight sites (2,959 beds) for proposed development between 2019 and 2021.
Watkin Jones is continuing to build momentum in the BTR sector. The Group has ownership of three development sites and is in separate negotiations on several other opportunities, from which it is targeting to develop approximately 1,500 units between 2018 and 2022, subject to securing the necessary planning consents.
The asset management business, Fresh Property Group, which includes Fresh Student Living and Five Nine Living, continue to progress in line with expectations. The number of beds under management has increased by 30% over the past year (16,082 beds) across 53 schemes for 2017/18.
Watkin Jones’ shares trade on 14.9x PER for September 2018 with a 3.1% dividend yield. For the following year the PER falls to 14.3x and a yield of 3.4%. This premium rating is deserved given its long-term record of growth, strong cash generation, and excellent medium term prospects.
The shares have risen by 60% since we initiated in March, and currently trade at just over a 40% premium to the house building sector. However, we think this is deserved and looking forward the risks to forecasts are on the upside.
Ready for the start of term
Published: Nov 02 2017
Watkin Jones’ year-end trading statement outlines its successful completion of all 10 planned student accommodation developments for FY2017, and reinforces the excellent visibility it enjoys due to its strong development pipeline and robust forward sales position. The company operates in two of the hottest areas of residential real estate, namely purpose-built student accommodation (PBSA) and build to rent sector (BTR).
The largest division of Watkin Jones has again performed well in 2017 with 10 developments being completed as planned (3,314 beds). Looking into 2018, 10 planned developments (3,415 beds) have been forward sold and provide the company with significant visibility. The 2019 position is also strong with five developments (2,959 beds) already forward sold. In addition, the company has secured an additional eight sites (2,959 beds) for proposed development between 2019 and 2021.
Watkin Jones is continuing to build momentum in the BTR sector. The Group has ownership of three development sites and is in separate negotiations on several other opportunities, from which it is targeting to develop approximately 1,500 units between 2018 and 2022, subject to securing the necessary planning consents.
The asset management business, Fresh Property Group, which includes Fresh Student Living and Five Nine Living, continue to progress in line with expectations. The number of beds under management has increased by 30% over the past year (16,082 beds) across 53 schemes for 2017/18.
Watkin Jones’ shares trade on 14.9x PER for September 2018 with a 3.1% dividend yield. For the following year the PER falls to 14.3x and a yield of 3.4%. This premium rating is deserved given its long-term record of growth, strong cash generation, and excellent medium term prospects.
The shares have risen by 60% since we initiated in March, and currently trade at just over a 40% premium to the house building sector. However, we think this is deserved and looking forward the risks to forecasts are on the upside.

[quepassa] 02/11/2017 09:41

Good research Note just issued this morning by Equity Development (www.equitydevelopment.co.uk)

[2vdm] 02/11/2017 09:11

Ah! Jeremiah Onwig, I always suspected that's who you were! jonwig, nothing wrong at all with SWOT. It brings you back to earth when it's so easy to get caught with enthusiasm, particularly with a share like this. The question is how far can this go without a re-trace. Fabulous story so far. On the "W" of SWOT I have 1) competition 2)Size of UK student accmd.i.e. saturation 4)Brexit effect 4)interest rate increases. Have these been priced in? I have been in here since day 1 and don't intend to sell, but it's worth evaluating all the strengths and weaknesses periodically imo.

[jonwig] 02/11/2017 07:30

bestace - yes, probably I am! I've always been keen on SWOT analysis which has the virtue of forcing one to look at what can possibly go wrong. I may appear a Jeremiah at times, but I haven't sold!

[bestace] 01/11/2017 20:26

jonwig - I still think you are over-egging the concern. The latest statement hints in 2 places that there is no shift in the business model away from forward selling:

"The Group is well positioned to expand its operations into the Build to Rent sector as... investor appetite gathers momentum."

and this:

"...This demonstrates the robustness of our model"

As I pointed out back in August, they have previously committed to going ahead with student developments before having contracted with a buyer so the fact they haven't yet forward sold their PRS projects does not necessarily mean they will be shouldering the risk through to completion.

[rivaldo] 01/11/2017 13:47

Looks like good news coming up on 7th November for WJG's 323 bed student scheme in Chester, with WJG set to get the green light to develop:



"Student scheme set to pull into bus depot site
1 Nov 2017

Proposals to build a major new accommodation scheme with capacity for 323 students on the site of a Chester bus depot are on the verge of securing the green light.

A full planning application by Watkin Jones' subsidiary Liverpool Road Chester to transform a 1.1-acre plot north of the city, opposite the grade II-listed George & Dragon pub on Liverpool Road, is due to go before Cheshire West & Chester Council's planning committee on Tuesday, 7 November 2017......

.....Ahead of the committee meeting, a report prepared by planning officers has recommended that the scheme should be approved."

[quepassa] 01/11/2017 07:37

The PRS market is bigger, just as urgent urgent and pressing (if not much more so more) than student accommodation. Demand for PRS is off the graph as fewer and fewer can afford outright home ownership nowadays.

WJG are ideally placed to capitalise on the demand for PRS -given their student accommodation experience which is in many ways very similar- and need to push PRS forward strongly to capture the full potential of this rapidly growing market.

Things move on and evolve. WJG's great track record in forward-selling can and should also give them the comfort and confidence to engage in prudent but energetic speculative PRS development.

If the CEO has got the guts to gear up and go for it on PRS, he has the opportunity to make himself a very rich man indeed.

ALL IMO. DYOR.
QP

[jonwig] 01/11/2017 07:04

WJG's usp on floating nineteen months ago was forward-selling - that it didn't expose its own balance sheet to speculative development risk. There's now a sense that they might be starting to do just this in their PRS activities. And this is now celebrated by shareholders as capturing the demand for such properties.

Well, if you think property values and the housing market can only go upwards and government promises to build a record number of homes will be fulfilled, then this is a share to be in, big time. (Don't tell me PRS is different - someone owns the houses, and taxation is particularly fraught (SDLT?)).

Here's a test: net cash at 31/03 was £16m and the current ratio a very healthy 2.5x.; will the balance sheet in future contain any signs of strain?

Alternatively, they might sell their PRS assets forward which would suit me.

[adamb1978] 31/10/2017 22:41

Agreed the BTR sector comments are the encouraging bit if you're looking for long-term massive outperformance given that it adds the opportunity to add a completely new sizeable profit stream to the existing business today. The existing bit should be able to tick up at 10% or so growth p.a. however the BTR part can add a real kicker to that

[cellars] 31/10/2017 11:57

jonwig,

re: forward selling BTR.

I am encouraged by the reference to investor appetite taken from the paragraph prior to the CEO's summing up: "The Group is well positioned to expand its operations into the Build to Rent sector as further sites and opportunities are being secured and investor appetite gathers momentum."

[tightfist] 31/10/2017 09:52

Interesting point about how much further the P/E will get stretched by the market. The PEG has risen sharply, it looks as though both the 2017 & 2018 analysts' eps forecasts are virtually unchanged for the last eight months. I guess there is now an over-performance expectation at the financial level?

[its the oxman] 31/10/2017 09:09

Consistent delivery and certainty of future earnings deserving of a high rating and 250p plus could very well be on the cards for Xmas.

[jonwig] 31/10/2017 08:52

Shanklin - decent stuff just gets more expensive!

A lot of new small-cap ITs have money to invest, and investors are hungry for VCTs, some of which are AIM specialists. New VCT top-ups are raising money like mad.

I see also that WJG is now SETS-traded. I don't know how long this has been so, but it does lead to lots of short-term trading and increases the chance of sudden reversals from time to time.

EDIT: some target prices - Jefferies 250p, Peel Hunt 230p.

[shanklin] 31/10/2017 08:39

Seems quite strange to me that the share price is moving along quite so sharply. It was an obvious bargain at circa £1 a while back, when it was one of my largest positions, but since then all its done is meet expectations.

Despite seemingly being a very well run company, does it justify the ongoing increase in its P/E?

[quepassa] 31/10/2017 08:25

solid Pre-Close Trading Update.

QP

[skinny] 31/10/2017 08:22

MACD looking positive.

[2vdm] 31/10/2017 08:19

Yes, certainly doing just what the bod said it would do and more. Under promised and over performed. Most AIM stocks should follow this example. Very focused professional bod. Where will the share price go from here as it's been a stellar year so far?

[glaws2] 31/10/2017 08:14

Thanks for the reminder jonwig

[adamb1978] 31/10/2017 08:07

Nice boring trading statement - continued delivery on what they had promised. Remains a very safe hold - positive long-term trends underpinning it, limited volatility in the business model, net cash, 10%ish EPS growth all for a mid teens PE.

[jonwig] 31/10/2017 07:36

Yes - it will do no harm to the share price, of course.

But notice, in para 3, the transparency re SA: sites forward sold into 2018 and 2019. However, in para 4 they have three sites for BtR with more to come and no mention of forward selling. In August (post #1033) I mentioned this and was met with a polite "Yes we hear you, but ..." (my one-time boss's favourite remark). Once they do announce forward sales of these units, I'll let it be, but it's worth bearing in mind that for the present they seem to be incurring balance sheet risk.

Results 15 January, and AGM will be about a month after that. I'll try to go there again if it's Manchester.

[rivaldo] 31/10/2017 07:27

Indeed, excellent stuff. Most importantly, you have to love a company which has already delivered ALL of its planned developments for the year ahead, plus a load of the developments for 2019 and even going forward to 2021.....the City loves this kind of forward visibility of revenues.

In addition, the accommodation management subsidiary has increased its beds under management by a whopping 30%. And Build to Rent is expanding well.

The CEO's comments are bullish:



"Mark Watkin Jones, Chief Executive Officer of Watkin Jones plc, said: "We are pleased to have delivered on our development pipeline objectives for the year, alongside a strong operational performance and expect to report underlying earnings in line with the Board's expectations.

2017 has been another year of significant progress for the Group with our student accommodation, Build to Rent and accommodation management divisions all performing strongly, providing us with excellent future earnings and cash flow visibility. This demonstrates the robustness of our model and ability to deliver significant returns for our shareholders."