TELFORD HOMES

Shares - - GREAT IDEAS UPDATES -

Gain to date: 14.1% Orig­i­nal entry point: Buy at 408.5p, 14 De­cem­ber 2017

In­vestors used full year re­sults from Lon­don­based house­builder Telford Homes (TEF:AIM) as an op­por­tu­nity for some mod­est profit tak­ing. How­ever, the stock still trades ma­te­ri­ally higher than the level at which we flagged it in De­cem­ber 2017.

In the year to 31 March 2018 Telford posted a 35% in­crease in pre-tax profit to £46m, against a forecast £45m, and said it could beat the £50m profit tar­get for the cur­rent fi­nan­cial year. This would add up to a dou­bling of pre-tax profit over a four-year pe­riod.

The com­pany, which fo­cuses on ‘non-prime’ or in other words less expensive parts of the cap­i­tal’s hous­ing mar­ket, says it is ben­e­fit­ing from an ‘un­der sup­ply’ of new homes in London and de­mand for more af­ford­able homes, par­tic­u­larly for rent­ing.

It ex­pects to take ad­van­tage of this de­mand by fo­cus­ing on the build-to-rent sec­tor across London.

Be­cause these projects are of­ten pre-funded by in­sti­tu­tional in­vestors this en­ables the com­pany to grow with­out tak­ing ex­ces­sive risk or need­ing ad­di­tional equity cap­i­tal.

Canac­cord Ge­nu­ity an­a­lyst Ayns­ley Lam­min says Telford’s val­u­a­tion is ‘less com­pelling’ af­ter its re­cent share price run, but it is still well sup­ported with im­proved vis­i­bil­ity on prof­its and growth.

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