Ready for the start of term
Watkin Jones’ year-end trading statement outlines its successful completion of all 10 planned student accommodation developments for FY2017, and reinforces the excellent visibility it enjoys due to its strong development pipeline and robust forward sales position. The company operates in two of the hottest areas of residential real estate, namely purpose-built student accommodation (PBSA) and build to rent sector (BTR).The largest division of Watkin Jones has again performed well in 2017 with 10 developments being completed as planned (3,314 beds). Looking into 2018, 10 planned developments (3,415 beds) have been forward sold and provide the company with significant visibility. The 2019 position is also strong with five developments (2,959 beds) already forward sold. In addition, the company has secured an additional eight sites (2,959 beds) for proposed development between 2019 and 2021.
Watkin Jones is continuing to build momentum in the BTR sector. The Group has ownership of three development sites and is in separate negotiations on several other opportunities, from which it is targeting to develop approximately 1,500 units between 2018 and 2022, subject to securing the necessary planning consents.
The asset management business, Fresh Property Group, which includes Fresh Student Living and Five Nine Living, continue to progress in line with expectations. The number of beds under management has increased by 30% over the past year (16,082 beds) across 53 schemes for 2017/18.
Watkin Jones’ shares trade on 14.9x PER for September 2018 with a 3.1% dividend yield. For the following year the PER falls to 14.3x and a yield of 3.4%. This premium rating is deserved given its long-term record of growth, strong cash generation, and excellent medium term prospects.
The shares have risen by 60% since we initiated in March, and currently trade at just over a 40% premium to the house building sector. However, we think this is deserved and looking forward the risks to forecasts are on the upside.
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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