Watkin Jones Share Discussion Threads

[rivaldo] 15/5/2020 13:37

The IC says Buy in its annual review of the AIM top 100 companies by m/cap:



"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 While management expects to report March half-year revenues and earnings in line with its expectations, it has withdrawn future financial guidance.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."

[its the oxman] 15/5/2020 09:13

Surely worth a punt at 145p

[2vdm] 12/5/2020 17:22

I don't agree if you are looking longer term. This is a well run company with a strong position and good reputation in growth sectors, student accommodation and buy to rent. I've been adding when I can and am taking a 3-5 year view,but agree this isn't a stock to trade. Just my view.

[sphere25] 12/5/2020 15:53

Really poor one this, just doesn't want to rally. Worst buy by a country mile I've made recently with the stock off 7%. Perhaps the sceptics are right here.

[farnesbarnes] 11/5/2020 21:04

Short term woes are the forthcoming academic year. Medium term, the housing market; btr is likely to suffer too.

Maybe much of this is baked into the current price, but there's no rush for anyone to be buying right now.

[farnesbarnes] 11/5/2020 21:04

(double post)

[clausentum] 11/5/2020 13:07

I sold at 279 and bought back at 170, as I felt that a £1 fall in the share price was adequate compensation for uncertainty about the future of the education sector. I am reassured by the fact that it is a capital light company with excellent forward selling. I don't expect it to bound back rapidly to 250+, but once building work is resumed I hope it will drift back to 200, which is a reasonable short term return on the current share price in these treacherous times.

[swiss paul] 10/5/2020 22:04

My worries are that Universities might go back to distance learning which may result in a slowdown for studnet accomm. I know there is teh buy to rent sector but if tenants cant pay bills then that nay result is a slowdown.

[mayers] 06/5/2020 15:32

Difficult to be positive here. Unlike other builders it is dependent also on the resolution of the issues surrounding higher education post CoVid19, not least the likely marked reduction of in-flow from foreign students. It seems not unlikely that this will lead to a major revision of higher education.
I was considering selling at a considerable loss prior to the recent fall and now can only hope for some partial recovery. DYOR

[rustle2] 06/5/2020 09:47

I have a note in my diary that the 6-month lock on family sales expires about now.
Interim results on May 19th.

[skinny] 04/5/2020 11:03

Clarification? .

[davemac3] 01/5/2020 10:10

trading update. They look as fit as anybody to come through this crisis and all this and most of next years deals forward sold. No divi and uncertain impairment due to cladding liability.

just noticed that was a month ago, I don't know what day it is!

[sphere25] 28/4/2020 12:19

Suspect the online side does come through in some shape or form for sure. Who knows when though! It could be decades away. I'm sure there are plenty of things society has learned from the virtual world through this crisis and clearly a hell of alot of it works.

Still too early and surely we look beyond this crisis after we go through a new new normal a new normal and then normal.

As for the price movements here, this stock is a monstrous tease. With the price currently at 179.2 this is now the third time it has flirted with a significant breakout by touching the late 170's or 180 price.

Andddd.....this is usually the point (they're just waiting for me to finish typing this post) someone comes in here and smacks it back down into a range again.

[farnesbarnes] 27/4/2020 08:27

I'm not buying online learning as a substitute for bricks and mortar learning, but shorter term, the potential for foreign students to delay coming to the UK for 20/21 academic year cannot be ignored.

[shaker44] 26/4/2020 08:24

I understand your point but it seems to me that social change happens slowly-it feels like 25 years ago we we rushing into the paperless society and cashless society. Progress has been made but slowly.
And post covid lock down, the social interaction uni offers is a very important element. Online is no real substitute yet imo.

[skinny] 26/4/2020 08:20

As ever, thanks Rivaldo.

[steve3sandal] 26/4/2020 08:15

Not currently a holder but did hold from ST initial recommendation. I’m just a bit more concerned than holders here about digital disruption. I mean why do you need to go to university in every subject if the lectures, tutorials and resources are online. Obviously some courses require experiential so need to be in place but not all. I feel like a shake up is coming. The universities have funding issues protected by the fact that you can’t get a university degree elsewhere but things change. I know the bull points but I just can’t buy back yet.
GLA and hopefully we get to the other side.

[rivaldo] 26/4/2020 07:46

New plans for a big 700 unit mixed build to rent, student and commercial use development in Bath:



"Plans released for 360 purpose-built rentals and 340 student bedrooms to replace Bath car showroom site"

"The plans include demolishing the existing site and building around 360 build to rent units with a mix of studio, one, two and three bedroom apartments, including affordable units.

They also include around 340 purpose built student bed spaces, 740 secure cycle spaces, and around 750 square metres of commercial space."

[rustle2] 24/4/2020 11:10

Rising on the back of Builders Shares with talks of reopening construction sites.

Must be a threat in the longer term of reduced overseas student numbers. How firm are forward sales here? Could they be renegotiated?

[sphere25] 24/4/2020 10:10

Very significant breakout currently being threatened.

[sphere25] 23/4/2020 14:54

Nibbled a few here

[skinny] 15/4/2020 10:35

Thanks Rivaldo.

[rivaldo] 15/4/2020 10:27

Here's the text of ST's article:



"COVID-19: Watkin Jones’ business model offers protection
Simon Thompson

Solid earnings visibility, the ability to forward fund developments through institutional partners, and the strong fundamentals supporting all parts of the business are key attractions of the ‘capital light business’ model of property development group Watkin Jones (WJG:172.5p).

The group specialises in developing purpose-built student accommodation (PBSA) in top university towns, and build-to-rent (BtR) housing in UK regions where there is a housing shortfall, as highlighted by the fact that all 10 developments scheduled for completion this year have been forward sold, as have eight of the 10 developments scheduled for next year. The forward pipeline stretches out even further still.

However, the temporary UK lockdown means that all non-essential construction work has halted across the group’s sites, prompting the board to withdraw financial guidance. Analysts had expected 2019 adjusted earnings per share (EPS) of 16.7p to increase to a consensus of 18.2p in the 12 months to 30 September 2020, and support an 8 per cent hike in the 8.35p a share dividend. Clearly, earnings will fall shy of previous (and withdrawn) forecasts given that sites are closed, although I would stress that construction work can restart quickly once the lockdown is lifted.

Also, the benefit of the group’s low-risk business model is that there is little development risk to Watkin Jones as the institutional client pays for work as it progresses, and fixed price ‘design and build’ contracts insulate the group from construction risk, as analyst Alastair Stewart at Progressive Equity Research points out. Moreover, it's highly likely that Watkin Jones will be able to acquire sites for future developments on the cheap from distressed land sellers, too. Watkin Jones retains a strong liquidity position, ending the first half with gross cash of £71m (net cash of £36m) and £31m of headroom on a revolving credit facility.

So, having suggested buying shares at the IPO around the 100p mark ('A profitable education', 3 Apr 2016), banked dividends of 26.55p and seen the price smash through my 275p target price after I covered the annual results (‘Building shareholder value’, 14 Jan 2020), I would hold on for the recovery. The fundamentals supporting the investment case have not changed, only the timing of the release of profits (and the flow of dividends) from what remains a strong forward funded blue-chip development pipeline."

[rivaldo] 14/4/2020 14:18

Tipped at midday today by Simon Thompson for the IC:



"Simon Thompson 2 hours ago
COVID-19: Watkin Jones’ business model offers protection

Solid earnings visibility, the ability to forward fund developments through institutional partners, and the strong fundamentals supporting all parts of the business are key attractions of the ‘capital light business’ model of property development group Watkin Jones (WJG:172.5p)....."

[leewain] 14/4/2020 14:18

Solid earnings visibility, the ability to forward fund developments through institutional partners, and the strong fundamentals supporting all parts of the business are key attractions of the ‘capital light business’ model of property development group Watkin Jones (WJG:172.5p). 

The group specialises in developing purpose-built student accommodation (PBSA) in top university towns, and build-to-rent (BtR) housing in UK regions where there is a housing shortfall, as highlighted by the fact that all 10 developments scheduled for completion this year have been forward sold, as have eight of the 10 developments scheduled for next year. The forward pipeline stretches out even further still.

However, the temporary UK lockdown means that all non-essential construction work has halted across the group’s sites, prompting the board to withdraw financial guidance. Analysts had expected 2019 adjusted earnings per share (EPS) of 16.7p to increase to a consensus of 18.2p in the 12 months to 30 September 2020, and support an 8 per cent hike in the 8.35p a share dividend. Clearly, earnings will fall shy of previous (and withdrawn) forecasts given that sites are closed, although I would stress that construction work can restart quickly once the lockdown is lifted.

Also, the benefit of the group’s low-risk business model is that there is little development risk to Watkin Jones as the institutional client pays for work as it progresses, and fixed price ‘design and build’ contracts insulate the group from construction risk, as analyst Alastair Stewart at Progressive Equity Research points out. Moreover, it's highly likely that Watkin Jones will be able to acquire sites for future developments on the cheap from distressed land sellers, too. Watkin Jones retains a strong liquidity position, ending the first half with gross cash of £71m (net cash of £36m) and £31m of headroom on a revolving credit facility.

So, having suggested buying shares at the IPO around the 100p mark ('A profitable education', 3 Apr 2016), banked dividends of 26.55p and seen the price smash through my 275p target price after I covered the annual results (‘Building shareholder value’, 14 Jan 2020), I would hold on for the recovery. The fundamentals supporting the investment case have not changed, only the timing of the release of profits (and the flow of dividends) from what remains a strong forward funded blue-chip development pipeline.