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This brownfield developer, housebuilder and partnership housing company has announced a raft of planning approvals that will create significant value for its shareholders
September 24, 2019

Aim-traded shares in Inland Homes (INL:76p), a leading brownfield developer, housebuilder and partnership housing company with a focus on the south and south-east of England, made an important chart break-out this week following a trading update that revealed just how the company is creating substantial value for shareholders.

The share price has taken out the 70p resistance level that had capped progress since mid-June, and a rally towards, and perhaps beyond, the all-time high of 89p dating back to January 2016 looks firmly on the cards given the lack of technical resistance on the chart. The fundamental case for investing is hugely supportive, too, of a continuation of the rally.

Inland’s flagship 100-acre site at Wilton Park, Beaconsfield, has received formal planning consent for the delivery of 350 homes and some commercial and community space which has a gross estimated development value of £350m. In addition, a further part of the site is subject to a draft allocation for development which, if adopted, could provide a further 250 homes and 200,000 square feet of commercial space. The prime site is located close to the M40 and to Beaconsfield mainline train station, so providing commuters with access to London Marylebone within 23 minutes.

That’s not the only important news as Inland has exercised a call option to buy out its joint-venture partner at Cheshunt Lakeside, Hertfordshire, after the local authority granted planning consent to create a new urban village of 1,725 homes and 19,000 square metres of commercial space. The site is located just outside the M25 and is only 27 minutes from London's Liverpool Street station by train. Inland is paying £29.9m to buy out its partner and will own and control 1,253 of the consented residential plots and 4,905 square metres of commercial and educational space within the Cheshunt masterplan area, which has an estimated gross development value of £620m. Inland is the lead developer on the broader masterplan, and is working with the council to deliver it. 

Inland’s directors have also reported that the company’s strategic land bank has increased significantly, too. Inland now holds 31 options (held on a discount to market value land prices) on sites covering 480 acres with the potential for 2,650 plots. In the past month, the company has obtained a resolution to grant planning permission on a 78 plot site in Cressing, Essex; sold 60m plots at a site in Bedfordshire to Linden Homes; and received draft allocations for 200 units on two sites in Berkshire and Buckinghamshire.

Simon Thompson's 2019 Bargain Shares Portfolio performance
Company nameTIDMMarket value Opening offer price 1.02.19Bid price   24.09.19 DividendsPercentage change
TMT Investments (note one)TMT$163m250¢580¢20¢140.0%
Futura Medical FUM£71m14.85p34.5p0p132.3%
InlandINL£156m57.75p75p0.85p31.3%
Ramsdens HoldingsRFX£59m165p190p4.8p18.1%
Jersey Oil & GasJOG£49m205p226p0p10.2%
Bloomsbury PublishingBMY£181m229p243p6.75p9.1%
Augmentum FintechAUGM£124m102.4p106p0p3.5%
Litigation Capital ManagementLIT£86m77.5p79.2p0.28p2.6%
Mercia TechnologiesMERC£91m29.57p30.0p0p1.5%
Driver GroupDRV£27m74p50p0.5p-31.8%
Average      31.7%
FTSE All-Share Total Return index6,8527,464 8.9%
FTSE Aim All-Share Total Return index1,0231,003 -2.0%
Note 1: Simon advised taking profits on TMT Investments at 580¢ a share on Monday, 9 September 2019 ('Takeovers, tender offers and taking profits', 9 September 2019).
Source: London Stock Exchange opening offer prices at 8am on 1 February 2019 and bid prices at 10:45am on 24 September 2019.

The stream of planning approval highlights Inland’s strategy of acquiring quality land in areas of high demand, adding significant value by securing planning permission, and then generating value for shareholders through a mix of selective in-house development and by providing a turnkey solution for development partners. The likely realisation of substantial gains on the company’s land bank as it passes through the planning process, and an attractive share price discount to net asset value (NAV), were key bull points when I included Inland’s shares, at 57.75p, in my 2019 Bargain Shares Portfolio.

Clearly, investors are taking note of the progress being made as the shares have produced a total return of 31 per cent in less than eight months since I launched my portfolio. There is significant further upside potential, too. That’s because we can expect Inland’s end 2018 European Public Real Estate Association (EPRA) NAV of £213m (103.6p a share) to increase sharply when it releases a pre-close trading update in early October 2019, having sensibly moved its financial year-end from 30 June 2019 to 30 September 2019 to be able to offer greater financial clarity on the Cheshunt Lakes and Wilton Park developments. Also, the completion of the buy-out of its joint-venture partner at Cheshunt Lakes is scheduled for 30 September, so the forthcoming annual results will also reveal the added value this transaction has created for Inland’s shareholders.

Analysts are holding fire on upgrading their financial estimates, but I estimate that the Wilton Park and Cheshunt Lakeside flagship developments have the potential to create additional value of up to 50 per cent of Inland’s last reported NAV, albeit the company is likely to be more conservative in its valuation approach in the 2019 accounts. The point being that with Inland’s shares trading on a 28 per cent discount to NAV per share prior to significant analysts’ upgrades, the potential for a material increase in the carrying value of the company’s two flagship developments is not in the price, nor for that matter is the near-term profit potential if Inland decides to sell on parcels of land to major housebuilders.

Trading on a bid-offer spread of 75p to 76p, I maintain my target price of 95p to 100p. Strong buy.

 

■ Simon Thompson's latest book Successful Stock Picking Strategies and his previous book Stock Picking for Profit can be purchased online at www.ypdbooks.com, or by telephoning YPDBooks on 01904 431 213 to place an order. The books are being sold through no other source and are priced at £16.95 each plus postage and packaging of £3.25 [UK]. Postage and packaging is only £3.95 for purchases of both books.

Details of the content of both books can be viewed on www.ypdbooks.com. They include case studies of Simon Thompson’s market beating Bargain Share Portfolio companies outlining the investment characteristics that made them successful investments. Simon also highlights many other investment approaches and stock screens he uses to identify small-cap companies with investment potential, too.

Simon Thompson has been named 2019 Small Cap Journalist of the year at the 2019 Small Cap Awards, a prestigious event celebrating the best and rewarding the finest professionals and companies that work within the AIM and NEX communities. It is attended by institutions, fund managers, brokers and advisors operating in the sub-£100m market cap quoted company sector.