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Urban&Civic to build its own houses

Urban&Civic already prepared land for housebuilders and has a number of building point ventures, and will now also build houses itself
May 31, 2016

"Purchasing power in Middle England and the continuation of Help to Buy are much bigger factors for Urban&Civic (UANC) than Brexit," said chief executive Nigel Hugill, adding: "Our best barometer is to count the number of diggers on our site."

IC TIP: Buy at 260p

Judging by the first-half performance, progress has been impressive, with profits up by nearly a half and adjusted net asset value up 5 per cent at 270.9p. The underlying picture is even stronger because large development sites on its books receive a wholesale valuation rather than the higher value crystallised when packages are sold in smaller amounts. The difference between the two is estimated by the company at around 55p a share.

Business remains brisk, with more than 20 reservations at its joint venture with Hopkins Homes at Alconbury, even before completion of the show house.

Bringing land through the planning process for hungry housebuilders is relatively low risk, but the returns compared with building and selling houses are smaller. So the company is now to start building its own houses, targeting cash realisations of five times book value. That is about double what Urban&Civic would get from licensed deals, whereby the group receives a proportion of the end sales value from an external housebuilder.

Analysts at Stifel are forecasting adjusted net asset value per share at September 2016 of 295p, from 272p a year earlier.

URBAN&CIVIC (UANC)
ORD PRICE:260pMARKET VALUE:£376m
TOUCH:255-260p12-MONTH HIGH:291pLOW: 236p
DIVIDEND YIELD:1.1%TRADING PROPERTIES:£193m
PREMIUM TO NAV:7%
INVESTMENT PROPERTIES:£157m*NET DEBT:£1.5m

Half-year to 31 MarNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20152415.84.01
20162448.44.61.1
% change+1+44+15+10

Ex-div: 9 Jun

Payment: 22 Jul

*Includes joint ventures