Temporary suspension of non-essential work
There is an expression on Wall Street that the “market goes up the escalator, but down the liftâ€. However during these type of ‘Pearl Harbor’ moments, investors are also offered incredible ‘once in a generation’ opportunities.Sure we are not trying to call a bottom, albeit the risk/reward balance has now seriously shifted to the upside, especially for quality names like Watkin Jones.
Last week, the firm said it was temporarily suspending all non-essential work at its PBSA, BtR and housebuilding sites, in line with the rest of the industry. Nevertheless, sporting gross cash of £71m (net £35m, post site specific loans) as at March 2020, and a further £31m of undrawn credit facilities, we are confident that the group will emerge from this crisis in a stronger competitive position.
Additionally WJG has forward sold all of its 2020 developments, and 8 out of ten of those scheduled for 2021. Thus providing robust cashflow/earnings visibility, despite near term revenue recognition being pushed to the right due to business interruption and social distancing measures.
In terms of the numbers, the Board has temporarily suspended both guidance and the dividend, until “disruption caused by COVID-19 is better understoodâ€. That said the company is already cutting discretionary spend and future investment, albeit mindful not to harm operational capability. Whilst further evaluating fiscal support programs.
At 146p, the stock appears attractively priced - trading on a trailing PER of 8.7x compared to typical sector multiples pre COVID-19 of between 10x–15x.
Good things come to those who are patient.
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.
Equity Development enables companies to become better understood and supported by investors. Since our launch in 1996 we have consistently focused on helping our clients improve their communication and relationships with both existing and potential shareholders. Our clients have come from a wide variety of sectors and domiciles, are both private and quoted and range in size from micro-cap to $multi-billions. We offer free access to company research notes written by experienced analysts. These notes include detailed forecasts, financial models and a fair value. We host regular Private Investor Forums at which investors have the opportunity to hear company directors present, and to ask questions. These are free to attend. We broadcast live Webinars with company management that include active Q&A. We also make the recordings available online. We arrange face to face meetings between private investors and company management. We are active users of Twitter, commenting daily on company news, share price moves, Directors’ Dealings, Equity Development Research Notes & Events.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.