Bovis Homes: Bucking the trend

Bovis Homes: Bucking the trend

Mike van Dulken, Head of Research at Accendo Markets, commented this morning:

Bovis Homes is bucking a sector trend, +4.2% this morning and back close to November’s record high. Investors are embracing its Jan trading update, at odds with how they digested this week’s statements from bigger peers Persimmon (Tues; -1% a day all this week), Taylor Wimpey (Weds: -4%) and Barratt Developments (Thurs: -2.7%). This is helping the sector bounce back after a tough week which started with disappointing Halifax House price data that countered good news from Nationwide last Thursday.

Bovis FY completions may have fallen by 8.3% (-10% in H2, worse than H1’s -5.6%) however, investors are unperturbed. This is thanks to average selling prices per completion climbing an almost offsetting 7% (private sales prices +9% vs completions -11%). Management’s continued focus under the new CEO, shifting the sales the mix away from older, lower margin sites is clearly working, and a brand new range will launch this year.

Reiteration of FY profits guidance is always good to hear, as is a forward order book already accounting for 40% of FY18e revenues. The cherry on the cake, however, is continued balance sheet restructuring and disposals having turned a net debt position into net cash, and the additional cash flow allowing for an 8% hike to the interim dividend. Furthermore, management is confident enough to table plans for 20% dividend growth in 2018 and a first special dividend before year end. A 4.1% dividend yield is already healthy, meaning this may support to the shares in the near term by making them more attractive than the bigger peers they lag in terms of income (Barratt Developments and Taylor Wimpey pay a whopping 7%).

The company points to solid industry fundamentals with strong demand for new homes supported by accommodative financing, government initiatives as well as the well documented shortage of national supply. Long may this continue. 2016’s harmful profits warning is very much water under the bridge. But be prepared for the sector to remain sensitive to each and every one of our plentiful updates on UK house prices (e.g. Nationwide, Halifax, Rightmove, Land Registry, ONS).

Bovis Homes shares +3.4%. Accendo Markets does not have a rating or target price Bovis Homes

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Accendo Markets

Accendo Markets is an online trading services provider, offering CFDs, spread betting and forex to retail (private) clients. Accendo Markets was established in 2007 and has since gone on to win various awards including ‘2018 Winner of Best CFD provider’ at City of London Wealth Management awards and 2017 & 2018 Best CFD Research Service in ADVFN’s International Financial Awards Accendo Markets Ltd. is authorised and regulated by the Financial Conduct Authority (FCA). For more information, visit www.accendomarkets.com