Following the immediate aftermath of the Brexit result in June of last year, the Housebuilder sector took a bit of a battering. It has taken time for share prices to recover but the government’s commitment to building more homes has led Analysts to become more positive towards the sector over the last few months.
That’s why I’ve decided to train my focus this week on FTSE 250 Housebuilder, Crest Nicholson Holdings PLC. So why have I chosen Crest Nicholson above a number of, admittedly, very attractive alternatives?
Well, for starters, by calling Crest Nicholson a Housebuilder, I do them a disservice. They offer more than just bricks and mortar. They design and build homes for communities, offering sustainable, environmentally conscious solutions that fit naturally within their surroundings. All the things that a responsible housebuilder should offer.
Coupled with their attractive proposition are some really interesting fundamentals.
Each year over the last five years, the business has built on its previous year’s pre-tax profits, while improving it’s return on capital employed (ROCE). Borrowings are in line with it’s peers while the current ratio (3.60) and interest cover (16.5) suggest Crest is well placed to cover the cost of those borrowings.
As with many of its peers in the sector, the business has a very attractive forward P/E Ratio (7.81) and Price / Earnings Growth or PEG ratio (0.62) that can be attributed to the significant share price weakening post Brexit and the bullish forecasts of Brokers like Peel Hunt, Numis and HSBC, each suggesting healthy pre tax profit growth over the next two years.
The share price has climbed steadily over the last nine months and is now close to its pre-brexit levels. With the government committed to building homes for the UK’s growing population, Crest Nicholson’s strong fundamentals suggest they are well placed to prosper.
Graph source: Hargreaves Lansdown
On top of that, the business offers a really attractive dividend yield which is projected to rise from 4% in 2016 to over 6% in 2017. That means investors have an opportunity to benefit from the positive effects that compounding can bring to an investment, in addition to any capital gains from share price growth. At the time of writing, the share price is 549.50p
I’ll finish with the thoughts of Chief Executive, Stephen Stone, taken from the latest Annual Report (February 2017) – “There will be other challenges to face over the next few years, but I am confident we are well placed to meet them and further strengthen our position in the market.”
So, there’s my case. What do you think?
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Thanks for reading!
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