Excellent end of term report
Watkin Jones has reported a strong set of full year results with PBT, EPS and DPS in line with expectations. At this stage in the cycle the attractions of investing in a company that operates a lower risk model in two of the most attractive areas of residential real estate, namely purpose-built student accommodation (PBSA) and build to rent sector (BTR) are apparent, and we believe the stock justifies a significant premium to other housebuilders.Watkin Jones’ shares trade on 13.7x PER (calendarised) for September 2018 with a 3.5% dividend yield. For the following year the PER falls to 12.9x and a yield of 3.8%. In our opinion this is undemanding given the group’s consistent long term record of profit growth, its strong cash generation profile, its excellent medium term prospects as a leading developer within the growing UK student accommodation market and the growth opportunity within its BTR operation. 13.7x represents a 39% premium to the Housebuilding sector on PER.
We continue to argue that Watkin Jones offers considerably better medium term visibility and growth than the average Housebuilder and should therefore trade at a 30-50% PER premium to the sector.
Watkin Jones is a holding company. Through its subsidiaries, Co. is engaged in the property development and the management of properties for multiple residential occupation. Co. operates in the following segments: student accommodation, which is engaged in the development of purpose built student accommodation; build to rent, which is engaged in the development of build to rent accommodation; residential, which is engaged in the development of residential property; and accommodation management, which is engaged in the management of student accommodation and build to rent property.
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