Quintain (QED) effected a significant transformation last year - reflected by a sharp improvement in some key valuation metrics. Finally, all the signs are now pointing in the right direction.
Book value rose 11 per cent to 115p, and the loan-to-value (LTV) ratio fell from 53 per cent to 38 per cent over the year to March. Following the disposal of its share in the iQ student accommodation joint venture for £106.4m this month, the LTV is now as low as 23 per cent. This gives the group significant headroom to finance further developments, although management wants to keep gearing below 50 per cent.
Disposals reduced net rental income from £12.3m to £7.2m, but Quintain now has all but 12 per cent of its portfolio in and around London. Furthermore, income is expected to rise significantly this year as the group proceeds with the development of its Wembley site in north London. Marketing of the 475 homes already completed has been highly successful, with average selling prices equating to £570 per sq ft - well above analysts' expectations.
Broker Oriel Securities expects adjusted book value of 128p a share by March 2015 (from 114p in 2014).
