Telford Homes: Making capital in London
Telford Homes has published another positive set of full year results with record revenues and profits. The company has a large development pipeline, it enjoys excellent visibility through its forward order book and the balance sheet is robust. We expect continued growth over the next three years.Record results with a very strong H2
PBT came in ahead of original market expectations at £34.1m, up 6% YOY following a very strong performance in H2. This translated to EPS of 36.8p and the total DPS for the year is 15.7p.
Recent transactions look attractive
Over the past six months the company announced two major buy to rent sales, at The Forge, E6 (to M&G) and New Garden Quarter, E15 (to Folio London), generating over £100m of revenues. It also announced the acquisition of the LEB Building, E2, and it exchanged contracts on a large scheme at Stone Studio, Hackney Wick (E9).
Strong forward sales
Forward sales remain strong and the company will start the year with a considerable forward order book of £548m. This equates to over 65% of cumulative two years forecast sales. In our opinion a good level of forward visibility should equate to a higher than average rating. The company says it expects to exceed £40m PBT in 2018 and £50m PBT in 2019 and profit visibility is high with over 80% anticipated 2018 gross profit already secured, and over 60% for 2019.
Valuation still looks appealing
The stock trades at a 5% discount to the Housebuilding sector (on a PER of 9.1x) despite the attractive growth prospects and de-risked forward sales model. At current levels it also offers a dividend yield of 3.7%. On a Price/Net Asset Value (PNAV) ratio, it trades on 1.42x in 2018, falling to 1.26x in 2019, a 28% discount to the sector.
Attractive dividend yield
With the shares trading at 430p our 17.0p forecast DPS in 2018E equates to an attractive 4.0% dividend yield, rising to 4.4% in 2019E.
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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