Crest
Nicholson: The
big news for income investors in these final results to 31st October
2014 is the move to a higher dividend payout ratio. By 2017, they plan to
reduce dividend cover to 2x, reflecting anticipated strong cash generation and
a net cash balance sheet. In these results the dividend has been raised from
6.5p to 14.3p, up 120%. Forecasts for October 2017 are rather vague for now,
but 55p for October 2016 is plausible, so 64p could be a reasonable target. Two
times cover is a dividend of 32p, which at the recent 385p share price is a
distant yield of 8.3%.
This must be predicated on good trading continuing, but with
demand outstripping new build and modest price inflation outside the south-east,
the medium term industry outlook seems solid. The slow moving planning process
and capacity constraints mean that a glut of supply seems unlikely, whilst,
with the economy on the mend, demand seems well based. Current national
new-build is around 120,000, so Crest is but a small part at around 2,500. This
low share leaves plenty of room to grow. The UK house building sector is prone
to the boom bust cycle, but the next bust seems far away.
Shorter term, conservative eps for October 2015 of 45p is a PE
of 8.6x. Assuming a step down cover of 2.5x, this is a dividend of 18p for a
yield of 4.7%. My concern would be that NAV is 200p (historic), so price to
book is up at 1.9x (but falling). Instinctively I am worried about a boom bust
industry that politicians meddle with. That said there seems little reason for
income investors not to consider Crest favourably after these results. (Neil Cumming, 27th
January 2015)
These comments are not a personal recommendation to deal. Any
investments can fall as well as rise in value, so you could get back less than
you invest. I may have a financial interest in some of the stocks written
about. www.dividendpower.co.uk or
e-mail at info@dividendpower.co.uk Twitter: @DividendPower
No comments:
Post a Comment