Watkin Joneshttp://www.watkinjonesplc.com/ TICKER: WJG EXCHANGE: AIM
Watkin Jones provides an end-to-end solution in developing large scale, multi occupancy accommodation projects, with a primary focus on the student accommodation market.
Following Watkin Jones' FY2019 results, new CEO Richard Simpson discusses the macro picture for both student accommodation and Build-to-Rent. Group Finance Director Phil Byrom outlines the strong on-going appetite from institutional investors for these investment classes.
Watkin Jones has reported a robust set of interim results with PBT, EPS and DPS coming in ahead of our expectations. This company operates in two of the hottest areas of residential real estate, namely purpose-built student accommodation (PBSA) and build to rent sector (BTR) and it operates a lower risk model. Therefore we believe it should trade at a bigger premium to other housebuilders.
The company produced another strong set of results during H1. Despite an expected 8.4% decline in H1 revenues, significant margin gains drove a 23.8% increase in gross profits. Adjusted PBT rose 26.6% to £21.1m; EPS +28.8% to 6.7p. The company reported an interim DPS of 2.2p.
PBSA development: the company's largest division reported strong profit growth H1 with a significant increase in gross margins. Visibility of sales and earnings is very high in this division. It is set to have a very good second half with growth in revenues and margins YOY.
PBSA management: Fresh Student Living continues to grow its number of beds under management. It currently has 12,117 beds under management and this is set to grow to 19,532 by 2020.
BTR development: WJG completed its first BTR development in Leeds in the period. With a site with planning secured in Sutton and two further sites progressing through planning, we believe the medium term opportunity within this space is significant.
BTR management: the newest part of the group, Five Nine manages the Leeds scheme and currently has 535 BTR units under management.
Watkin Jones’ shares trade on 14.1x PER for September 2017 with a 3.5% dividend yield. For the following year the PER falls to 12.9x and a yield of 3.8%. This appears undemanding given the group’s consistent long term record of' growth, its strong cash generation, and its excellent medium term prospects as a leading developer within the growing UK student accommodation market.
Foreign buyers gorging on UK stocks
Document can be downloaded here: UK plc ‘going for a song’
Being a shareholder in a company that receives a juicy takeover offer is a marvellous feeling. Something that many fortunate investors have experienced over the past 3 years. Thanks to a spate of M&A bids by deep pocketed overseas buyers – partly triggered by the June 2016 Brexit result, which sent the £ tumbling and adversely affected the FTSE.
Consequently today, given this trend is unlikely to end anytime soon, we’ve highlighted 30 possible acquisition ideas in the attached research paper. Spilt equally between large and smallcap stocks – covering a broad selection of industries.
What’s more we believe most of these businesses are underpinned by strong fundamentals and substantial upside in the event of predatory interest.
According to Factset Mergerstat/BVR, the average bid premium paid for such deals between 2004-14 was 30% – with the figure trending upwards since the global financial crisis.
Happy investing. Published 27th August 2019