New: Har­worth / Ele­cosoft Up­dates: K3 Cap­i­tal / Re­store

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In­vestors should snap up shares in re­gen­er­a­tion spe­cial­ist Har­worth (HWG) be­fore the com­pany joins the FTSE All-Share for the first time on 24 Septem­ber.

Pre­vi­ously hold­ing a stan­dard list­ing on the Lon­don Stock Ex­change, the com­pany shifted to a premium list­ing at the be­gin­ning of Au­gust and its cur­rent mar­ket cap should see it join the FTSE Small Cap in­dex, where it would au­to­mat­i­cally be bought by tracker funds.

Be­yond this tech­ni­cal cat­a­lyst, there are clear rea­sons to buy Har­worth, with the com­pany, in the words of Peel Hunt an­a­lyst James Car­swell, able to ‘gen­er­ate good to­tal re­turns in a rel­a­tively flat real es­tate mar­ket’.


Har­worth chief ex­ec­u­tive Owen Michael­son says the com­pany fo­cuses on ‘beds and sheds’ in the North and the Mid­lands, own­ing and man­ag­ing a port­fo­lio of 21,000 acres on 136 dif­fer­ent sites.

For­merly the prop­erty di­vi­sion of UK Coal, Har­worth makes money by buy­ing brown­field land at an at­trac­tive price, ob­tain­ing the nec­es­sary plan­ning con­sents and clean­ing up what are of­ten ex-in­dus­trial sites and sell­ing the land on to third party de­vel­op­ers or, in some cases, de­vel­op­ing the land it­self.

The com­pany also re­tains se­lected land and prop­erty as­sets to gen­er­ate growth and a long-term re­cur­ring in­come. It is look­ing to im­prove the qual­ity of this in­come by sell­ing off lowyield­ing agri­cul­ture land and some of its more ma­ture sites. This is a stock to buy more for cap­i­tal gains as the fore­cast yield is a rel­a­tively mod­est 0.7%.


In the first half of the year, the com­pany saw a 10.9% year-onyear in­crease in its net as­set value per share. It hiked the div­i­dend by 10% and gen­er­ated value gains in the port­fo­lio of £10.5m.

The out­look is sup­ported in the near-term by the fact more than 90% of fore­cast sales are either com­pleted, ex­changed or in the le­gal process. On a longer term view it has a port­fo­lio of con­sented sites stand­ing at 10,638 res­i­den­tial plots and 12.13m square foot of com­mer­cial space.

Af­ter an ac­tive pe­riod for ac­qui­si­tions, with a £50m out­lay in the first half, the com­pany’s loan to value ra­tio was slightly above the tar­geted 10% to 15% range at 19%. How­ever, this is ex­pected to come down by the year-end due to a re­peat of the typ­i­cal sec­ond half weight­ing for as­set sales.

The shares cur­rently trade at a ma­te­rial dis­count to Canac­cord Ge­nu­ity’s 2018 fore­cast NAV of 142.8p and we would ex­pect this gap to close as the com­pany en­joys its new-found FTSE sta­tus and de­liv­ers its ex­pected strong sec­ond half.

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