Strong H2 expected
​Telford Homes specialises in planning, designing and building developments on brownfield sites in London. The company is a hands-on developer with in-house construction expertise. It builds apartments and houses in the main, but also builds commercial property, schools, churches etc. It has a strong balance sheet, a large development pipeline and impressive forward sales position, as well as good levels of demand for its product and geography from a diverse group of buyers
H1 results were in line with expectations with PBT of £9.0m, EPS of 9.9p and DPS of 7.2p. The NAV / share is 253p. We expect the company to have a strong H2 based on its forward sales position and the timing of developments coming through, but make no change to forecasts at this stage.
The company has a forward sales position in excess of £700m forward order book and this equates to over 60% of cumulative three years forecast sales. This is the highest level of forward sales in the sector (relative) and in our opinion a good level of forward visibility should equate to a higher than average rating.
The development pipeline is £1.42bn compared to £0.6bn three years ago. With the successful £50m fundraising in 2015 and £125m headroom on its banking facilities it has the financial firepower to expand this pipeline further and there remains a number of opportunities in its locations.
Telford shares are on a current year PE of 8.7x, falling rapidly to 6.6x in the year to March ’18, and again to just 5.4x the following year. From a PNAV perspective it trades on 1.15x in 2017, falling to 1.04x in 2018, a 34%x discount to the sector average. Our 35.9p EPS forecast gives rise to a DPS of 15.7p. With the shares trading at 313p this equates to an attractive 5.0% dividend yield rising to 5.2% in 2018E.
In today’s release the CEO states ‘Telford Homes is in a very strong position ’ and the Board ‘is confident in the outlook, both short and long term.’
Telford Homes is a developer of residential-led, mixed use sites in London. Co.'s customers include individual investors from the U.K. and overseas, owner-occupiers and housing associations. Co. is working with institutional investors in the build to rent sector. Co. has only one reportable segment being housebuilding in the U.K.
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