Follow-ups on Inland Homes and The Brighton Pier Group
Inland Homes (LON:INL)
Well, I told you ‘brownfield’ was OK!
You may well have missed it – the announcement on Monday that the major property group Land Securities has just pulled off a mega-coup in paying £190m for the U+I Group (LON:UAI).
That company was one of my profiled stocks earlier this year (13.01.21 @ 63p set a Target Price of 80p*).
So, I am delighted with the LandSec agreed bid of 149p cash almost eleven months later. That is a clear 136% improvement.
Why am I mentioning this fact
Well, the answer is that it is a player in the ‘brownfield’ sector and of similar size to my recently featured Inland Homes group, which is also a big ‘brownfield’ specialist.
As I detailed last Friday, its shares are significantly undervalued, begging the question could another property sector ‘biggie’ also be looking to take it out of the scene?
At the start of the week Inland issued a very bullish Trading Update, which helps to highlight further just how undervalued its shares really are at the current levels.
Very increased dealing volumes this week
Over six times the average deals were completed on Monday after this group’s Trading Update was declared – some 1.34m shares having been traded on the day. They closed up 7.5% at 50p.
Then yesterday they edged even higher to 55p, before closing at 53.5p, after some 1.17m shares were traded.
The average daily volume is around 200,000.
Finals due in two months
The annual results for the year to end September will be announced in January, however, Monday’s Update spelled out significant progress in the group’s strategy to reduce net debt and looking to maximise its land values as it pursues its ‘asset light’ capital management.
It finished the second half of the year very strongly, with demand for its high-quality affordable housing more than doubling in the year from £23.8m to £56.5m in sales.
The group’s partnership side also did very well, while its order book has increased 56% to £164.7m.
Confidence in the current year
With this Update boss Stephen Wicks stated that “The group has made significant progress in delivering its key strategic objectives. Net debt has decreased substantially, and we continue to look for opportunities to deliver value from our considerable landbank.”
The company continues to see sustained demand from investors, build-to-rent operators, registered providers and private house buyers for its land, the new homes it builds and the group's planning and building expertise.
Wicks went on to declare that "We look forward to reporting further progress on our strategic priorities in the year ahead."
This group’s shares are worth well over twice the current price on its net asset value basis.
If a bidder started to stalk the company, whilst its shares are so undervalued, the price response would be swiftly higher than even Panmure Gordon’s 119p estimated value.
Now at just 53.5p the shares have some very appealing upside, certainly not to be missed.
(Profile 13.08.19 @ 68p set a Target Price of 110p)
(Profile 24.10.19 @ 77p set a Target Price of 110p)
(Profile 29.10.21 @ 46.5p set a Target Price of 60p)
The Brighton Pier Group (LON:PIER)
This current year is all about recovery and expansion.
The 52 weeks to 27 June this year could have been a great deal worse if it wasn’t for the insurance companies covering some of this group’s Covid-19 business interruption.
As it was it secured all of its £5m claim for a lot of its operating losses during the period.
And that showed up in last Monday’s final figures announcement with revenue for the period having understandably collapsed from £22.6m to £13.5m.
However, the group’s pre-tax profit of £4.2m compared impressively against the 2020 loss of £10.2m.
Earnings came out at 11.5p as opposed to the previous loss of 25.5p per share.
What does it do?
The group, which owns the Brighton Palace Pier, also includes in its broad leisure estate across the country, some eight premium bars, eight indoor mini-golf centres and the recently acquired 175-acre Lightwater Valley Theme Park.
Already we know that this current year will show even further improvement, with sales strongly ahead of 2020 by 145% and even 44% better than the corresponding pre-Covid period in 2019.
Analyst Peter Renton at the company’s brokers Cenkos Securities has estimated that the current year to end June 2022 will see revenues almost treble to £37m with the after-tax profits generating some 11.9p per share.
Renton rates the group’s shares as a ‘buy’.
On Monday, straight after the results announcement, the shares hit 83p at one stage,
before ending up over 10% better at 72.5p. That was after recording well over six times the daily average for its dealing volume.
On the broker’s estimates, the shares are trading on just six times current-year earnings.
I remain totally convinced that this leisure sector group’s shares, which closed last night at 71p, are undervalued and capable of an early attempt at breaking the 100p price barrier again, last reached three years ago.
A very strong hold, with the added temptation to add a few at around these prices.
(Profile 30.06.21 @ 61p set a Target Price of 75p*)