St Modwen’s share have bounced 54 per cent in the year to date, and these results suggest the optimism is justified. The book value rose 5 per cent in the first half as substantial gains on planning overwhelmed valuation declines in its investment portfolio.
The developer has three operations: planning and building houses (37 per cent of the portfolio), developing commercial premises (12 per cent), and collecting rent from high-yielding properties (51 per cent). The residential business remains the most profitable. St Modwen has been selling ready-to-build land in North London, where demand from housebuilders is strong, while constructing homes itself in weaker locations. It also has a joint venture with Persimmon, though chief executive Bill Oliver suggests he has been prioritising the company’s own housebuilding arm.
The investment portfolio, designed to cover the group's running costs, was written down by 5 per cent, even though rental income actually increased 3 per cent to £18.3m. The commercial-development business has seen slowing orders from the supermarkets, notably Tesco – once a reliable source of profits – but is protected by a four to five-year pipeline of existing projects. Overall, Mr Oliver expects to maintain the current 8-9 per cent growth rate.
Broker Peel Hunt forecasts adjusted full-year net asset value (NAV) of 266p (2011: 250p).
ST MODWEN PROPERTIES (SMP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 174p | MARKET VALUE: | £349m | |
| TOUCH: | 173-175p | 12-MONTH HIGH: | 199p | LOW: 100p |
| DIVIDEND YIELD: | 2.0% | TRADING PROP: | £150m | |
| DISCOUNT TO NAV: | 29% | |||
| INVESTMENT PROP: | £867m* | NET DEBT: | 74% | |
| Half-year to 31 May | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 226 | 37.4 | 14.3 | 1.10 |
| 2012 | 244 | 30.4 | 14.3 | 1.21 |
| % change | +8 | -19 | +10 | |
Ex-div: 8 Aug Payment: 3 Sep *Including share of joint ventures | ||||
