Watkin Jones Share Discussion Threads

[dlku] 30/6/2016 09:50

fewer students from EU?

also ASPs falling 15% in commercial sector being predicted

[alphabeta4] 30/6/2016 09:10

The story still remains intact IMO - realistically even if the UK economy has a recession students are still going to study and as touched on in a low yield world asset managers are still going to find the yields appealing.

I spoke with a university the other day and they said their places going to international students are many times oversubscribed (albeit it was a quality red brick). As I see it so as long as there is no blanket ban on EU student intake (unlikely) even if in the short term less apply it is unlikely to have much impact on the bottom line of student numbers except in some of the more poor quality universities - which I would suspect have low numbers of international students in the first place (why are you going to travel large distances for a poor quality education?)

[rivaldo] 30/6/2016 08:24

This just out from Beaufort Securities - 125p gives decent upside from here, but I'm hopeful of a lot more than that:

"Watkin Jones (WJG.L, 103.0p) - Speculative Buy

Watkin Jones, the leading UK developer and constructor of multi occupancy property assets focussed on the student accommodation sector, yesterday announced it had received planning consent to progress with its redevelopment of Duncan House in Stratford. The proposed redevelopment, which is located in Stratford High Street E15, consists of 511 beds (420 beds and 91 studios), 44 residential units and 30,000 square feet of academic space. The total gross development value of the scheme is around £100 million. Watkin Jones is in advanced negotiations with University of London, one of the world's most prestigious academic institutions and their funding partners, to forward sell the student part of the Duncan House scheme as per the Group's business model. The residential units will be sold in a separate transaction. The development is expected to be completed in 2019.

Our view: Another positive step! Coming hard on the heels of Watkin's IPO, however, investor questions are presently centering more around the Brexit outcome and its various company scenarios. But as far are Watkin Jones is concerned, the impact of separation from the EU is not expected to be significant. The number of EU students in the UK stands at around 125k (roughly 5%) and these are usually able to study on the same fees basis as our own 'home students'.

Should, in a 'worse case' outcome, EU students find themselves financially disincentivised from seeking a future UK education, the net impact on Watkin Jones should not be material. Occupation of its accommodation remains significantly oversubscribed by other international students, who tend to favour the security and conditions it offers compared with more traditional options.

Given also that the Group pre-sells its developments to asset managers who remain desperate to secure such high-yield collateralized income, its business opportunity very much remains intact. Indeed, this alternative asset class offers both excellent cash flow visibility and highly stable property-sector yields from operations that are well insulated from underlying economic activity. As such, it is able to forward-fund projects though a long list of hungry institutional buyers – creating an ideal high return, high visibility, capital light model that is almost unique in the world of residential development.

With just 6% of the UK's total full-time student population currently occupying PBSA (purpose built student accommodation), at a time when government legislation is limiting HMO (houses in multiple occupation) supply and introduced higher stamp duty on buy-to-let property, the sector is expected to enjoy quite significant growth for years to come while capital growth continues to sharpen returns.

The shares have been knocked by the Brexit outcome, which now presents investors with an important buying opportunity.

The Group is set to deliver double digit earnings growth (implying a 2016E P/E of 8.8x, followed by 7.7x) for the next several years, combined with a generous progressive dividend.

With significant net cash in hand at IPO, management was confident enough to project a current year yield to September 2016 of over 4% (based on second-half payment only), followed by 6.2% for full year 2016/17; beyond this, surplus generation could also find its way into shareholder's pockets through specials as well. Beaufort sees good value in Watkin Jones and now formally places a price target of 125p on the shares, which it recommends to both income and growth investors."

[alan@bj] 28/6/2016 17:15

The following is an article in today's Times' Tempus column about Empiric Student Property but some of it could equally apply to WJG:-

"A senior academic was telling me over the weekend that the main threat from Brexit to the UK’s universities was of a suspension of the sort of research grants that Brussels has been in the habit of disbursing. Though this must be worrying to those concerned, it does suggest that this particular threat is still some way off whatever happens.

Over the past decade or more, student numbers in the UK have risen. This means that the provision of student accommodation has been one of the most reliable sectors of the property market. There is not a lot that can happen over the next few years to alter this.

Shares in companies such as Unite Group, which specialise in these properties, have been falling though. There is no obvious justification for this. Empiric Student Property was floated two years ago at £1.

The shares were bouncing around wildly yesterday but ended off 7p at 101¾p. This makes little sense either. The company put out a trading update emphasising that only 6 per cent of all students in the UK come from EU countries. It specialises in more expensive accommodation preferred by wealthier overseas students, a market that is not going to dry up.

Empiric has carried out a number of cash raisings since coming to the market but is now not far off having sufficient funds to reach its ambition of 10,000 beds. The last net asset value was a bit more than 105p; that figure can only rise as those new beds come into service. Meanwhile, the dividend yield is 6 per cent. You are paid well to wait, then.

My advice Buy
Why There is still a shortage of student beds to rent"

[jonwig] 27/6/2016 08:21

Glaws - yes, I read that: lower pound and maybe lower interest rates benefit.

[nw99] 27/6/2016 07:33

Nice vote of confidence

[glaws2] 27/6/2016 07:30

Also note that ESP put a statement out this morning saying Brexit will have little/no impact on business.

[rivaldo] 27/6/2016 07:24

A substantial vote of confidence from the Chairman, buying 90,000 shares at 106.4p:

[jonwig] 24/6/2016 11:54

imranawan - thanks, I look forward.

Ahead of the referendum, some remainers were saying that our participation in Erasmus was at risk, but my understanding is that this is quite incorrect.
Here:

[imranawan] 24/6/2016 11:43

I work in a university and am also a holder. I'm due to attend a meeting where this will be discussed early next week, so will include some comments next week.

[jonwig] 24/6/2016 11:35

tightfist - mine aches too.

FWIW, I believe the UK will continue to welcome *all* overseas students: EU, and the rest. The dodgy non-courses are being closed down in any case.
As for EU students coming here, the Erasmus programme is EU-funded, but non-EU countries participate ("Partner countries"). Students aren't part of the migrant numbers now, of course.

Building more homes is recognised as a priority by all political parties, and rental won't go away. So build-to-rent shouldn't suffer. Personally, I think the higher rate of stamp duty will disappear with Osborne (soon, please), except at the very top end of the house price range.

[tightfist] 24/6/2016 11:20

OK, but is there going to be a continued willingness for investors to COMMIT and invest in student accommodation? Uncertainty is a killer and my guess is demand-side uncertainty will continue for years.I don't know how a new deal will impact on numbers of incoming Euro-students, with a weak Pound at least it will become cheaper to study here for all overseas students, although we may be viewed as more isolated nation and less attractive. Also I suppose there will less outbound students to the EU which partly offsets? On the other hand will 18 year-olds go straight into the world of work as EU migrants start to exit back to the EU?The other unknown has to be how interest rates develop and the value placed upon yield.It makes my brain ache......

[shanklin] 24/6/2016 09:49

Yes, added a few earlier.

[alan@bj] 24/6/2016 09:21

It's a bargain at this level!

[fugwit] 16/6/2016 13:25

many thanks, appreciated.

[dire cons] 16/6/2016 13:15

advfn don't like h t t p 's