Barrat Homes shares - good buy?
Discussion
Okay, at teh start of a housing crash, not the obvious choise, but they've collapsed in a year from approx £13 a share to approx 85p currently. Tey made about £400 million last year at about 17% profit margin, so with the value of new uild homes looking likely to fall more than 17% and far less sales, they are unlikely to be profitable for long.
However, net assets per share are running at £8.40 so if they went into liquidation, anyone buying the shares at their current price would surely be quids in, plus they have a land bank that will allow them to build at last years output for 5 years. Even if teh price of land falls %50, they still have vast assets.
I've little financial knowledge, but to me they look like a bargain. Does anyoe care to explain why the share price has got so low and why they're probably not such a great deal as they look on teh face of it?
However, net assets per share are running at £8.40 so if they went into liquidation, anyone buying the shares at their current price would surely be quids in, plus they have a land bank that will allow them to build at last years output for 5 years. Even if teh price of land falls %50, they still have vast assets.
I've little financial knowledge, but to me they look like a bargain. Does anyoe care to explain why the share price has got so low and why they're probably not such a great deal as they look on teh face of it?
Edited by PistonReg on Sunday 15th June 16:03
petermansell said:
No. The assetts are only as valuable as any market dictates ....
Their land bank was valued at 4.8 billion in 07 ad their net worth 2.9 billion. Even if teh value of teh land bank halved and they sold it all, they would still be solvent and above today's market value of 300 million.PistonReg said:
...Even if the value of the land bank halved and they sold it all, they would still be solvent and above today's market value of 300 million.
I think you'll find that Barratt's Directors would b rubbing their hands together in glee at the moment if they thought their land bank was still worth half what it was last year.Values of residential land have been annihilated by the recent slump. We recently reviewed a piece of land that we made an unconditional offer of £6 million on last year (which was refused) and found that it now has a negative land value. In other words, because of the Section 106 costs, abnormals build costs, etc., the landowner would have to pay us to take it off his hands if he wanted rid of it at the moment!
Obviously not every piece of land is so badly hit, but with the graph of build and S106 related costs (not least Code for Sustainable Homes) still climbing exponentially and the graph for revenue heading equally steeply in the other direction, 50% of last year's land values isn't the half of it (pardon the pun).
PistonReg said:
Okay, at teh start of a housing crash, not the obvious choise, but they've collapsed in a year from approx £13 a share to approx 85p currently. Tey made about £400 million last year at about 17% profit margin, so with the value of new uild homes looking likely to fall more than 17% and far less sales, they are unlikely to be profitable for long.
However, net assets per share are running at £8.40 so if they went into liquidation, anyone buying the shares at their current price would surely be quids in, plus they have a land bank that will allow them to build at last years output for 5 years. Even if teh price of land falls %50, they still have vast assets.
I've little financial knowledge, but to me they look like a bargain. Does anyoe care to explain why the share price has got so low and why they're probably not such a great deal as they look on teh face of it?
potential liabilities > potential asset value = fooked However, net assets per share are running at £8.40 so if they went into liquidation, anyone buying the shares at their current price would surely be quids in, plus they have a land bank that will allow them to build at last years output for 5 years. Even if teh price of land falls %50, they still have vast assets.
I've little financial knowledge, but to me they look like a bargain. Does anyoe care to explain why the share price has got so low and why they're probably not such a great deal as they look on teh face of it?
Edited by PistonReg on Sunday 15th June 16:03
There is obviously some shorting and over selling causing an artificial low, but that can all too easily lead to not being able to re-finance or expand or even just remain in business.
If you're loaded then have a punt, if not then take the current price as a very clear indicator that things are not good.
The company (I work for them) is going to produce circa £400 million in profit this year I think their final dividend might well be in excess of 10% (yield.) It's paid after the year end (June 30th so two weeks effectively).
Isn't there any argument to buy the shares simply for the expected dividend and then sell them?
Isn't there any argument to buy the shares simply for the expected dividend and then sell them?
Oi_Oi_Savaloy said:
The company (I work for them) is going to produce circa £400 million in profit this year I think their final dividend might well be in excess of 10% (yield.) It's paid after the year end (June 30th so two weeks effectively).
Isn't there any argument to buy the shares simply for the expected dividend and then sell them?
The shares will drop when they go ex divi so you will be (on average) no better or worse off.Isn't there any argument to buy the shares simply for the expected dividend and then sell them?
Nope. Their land bank is only worth what someone will pay for it (the sum total of very little at the moment). They have construction underway which must be paid for, but are struggling to sell the finished articles, meaning there's no money to pay the contractors effectively.
Personally, wouldn't touch them. They also have about £1.7bn of bank debt that needs to be serviced. They suffered a lot last week dues to some negative reporting on them and the sector, but there's still too many question marks over them.
In theory, they should in the long run be fine, but if the investors decide to dump shares again, it could all be over and that's the reason i wouldn't get involved.
Personally, wouldn't touch them. They also have about £1.7bn of bank debt that needs to be serviced. They suffered a lot last week dues to some negative reporting on them and the sector, but there's still too many question marks over them.
In theory, they should in the long run be fine, but if the investors decide to dump shares again, it could all be over and that's the reason i wouldn't get involved.
Considering their profit margins were running at around 15% last year, and city center flat prices have probably dropped about 15% in value in the last 6 mths they are going to struggle to turn a profit on selling existing stock.
Couple that with a land bank value in massive decline, 1.7 in debt that is becoming much more expensive to service, number of sales at an all time low, interest rates likely to climb again soon.
Nothing looks good for Barrat IMO. Tommorrow's CPI has huge significance thats for sure, if its up near 4% I dread to think.
Couple that with a land bank value in massive decline, 1.7 in debt that is becoming much more expensive to service, number of sales at an all time low, interest rates likely to climb again soon.
Nothing looks good for Barrat IMO. Tommorrow's CPI has huge significance thats for sure, if its up near 4% I dread to think.
Sam_68 said:
Values of residential land have been annihilated by the recent slump. We recently reviewed a piece of land that we made an unconditional offer of £6 million on last year (which was refused) and found that it now has a negative land value. In other words, because of the Section 106 costs, abnormals build costs, etc., the landowner would have to pay us to take it off his hands if he wanted rid of it at the moment!
So how much would it cost me to buy 1000sqm to build a 200sqm house in the suburbs of a medium-sized city?Scawie said:
So how much would it cost me to buy 1000sqm to build a 200sqm house in the suburbs of a medium-sized city?
How long is a piece of string? It depends on which suburb of what city and how you acquire the land. You are into a different ballgame, compared to 'commercial' sites for 50+ houses; on the one hand, you wouldn't have nearly such an issue with Section 106 costs and anywhere you're likely to want to build a 200 sq. m. house is likely to be on a nice, easy site with negligible infrastructure and abnormals costs... on the other hand, you're not doing anything for the LPA's targets on housing numbers, so they're not going to be interested in supporting the planning, and government policy states that unless there are exceptional circumstances, development should be at a minimum density of 30 dwellings per hectare (so you should be getting at least 3 houses on that size plot).
The long piece of string (land being marketed as a building plot - the potential for which has already been recognised - in a nice area) is several hundred thousand pounds.
The short piece of string (find yourself a suitable house with a big garden, buy the house, then sell it off minus your plot) is less than nothing. One of our sites recently was a large house that we bought for £1 million, sold minus most of its garden for £650K and built 18 detached houses on the remainder (so plot cost of £19.5K per plot, effectively, and that was at the height of the boom). If we'd have been in your situation, we'd have left the house with half its garden, sold it for pretty much what we paid for it, and ended up with a very large, well situated building plot for nothing...
The short piece of string (find yourself a suitable house with a big garden, buy the house, then sell it off minus your plot) is less than nothing. One of our sites recently was a large house that we bought for £1 million, sold minus most of its garden for £650K and built 18 detached houses on the remainder (so plot cost of £19.5K per plot, effectively, and that was at the height of the boom). If we'd have been in your situation, we'd have left the house with half its garden, sold it for pretty much what we paid for it, and ended up with a very large, well situated building plot for nothing...
That looks like an awesome deal. Any affordable as part of the 18 units? Even if there are - that's still a great deal.
How is the Barrats group structured? I know near me that sites are done by both Barrat (southern counties) and Barrat (kent) sometimes with both "companies" working in the same site, I was also under the impression the Barrat (Northampton) went bust recently and sold off some part finished new builds to one fo the other house builders (possible even one of the other Barrats) that were flattened and started again. I certainly get the impression that it's pretty securely ring fenced to leave the assets at the top of the tree and the liabilities with the sub companies.
mel said:
How is the Barrats group structured? I know near me that sites are done by both Barrat (southern counties) and Barrat (kent) sometimes with both "companies" working in the same site, I was also under the impression the Barrat (Northampton) went bust recently and sold off some part finished new builds to one fo the other house builders (possible even one of the other Barrats) that were flattened and started again. I certainly get the impression that it's pretty securely ring fenced to leave the assets at the top of the tree and the liabilities with the sub companies.
Barratt have been thrown a lifelinehttp://www.bloomberg.com/apps/news?pid=20601102&am...
Oi_Oi_Savaloy said:
That looks like an awesome deal. Any affordable as part of the 18 units? Even if there are - that's still a great deal.
Yep, three of them - a pair of semis and a bunglow - which stood out like a prick on a wedding night, amongst the 4 and 5 bed detached that made up the remainder of the site, but even so, we made the sort of margin that is but a distant dream in the current market!Gassing Station | Business | Top of Page | What's New | My Stuff