Since our first board, Bellway has further strengthened its position in the market. For example, in its last fiscal year, the company increased the size of its owned and controlled land reserve by 25% and now owns more than 56,000 plots. It has also maintained a strong financial position, evidenced by a net cash position of £ 330million, and aims to increase its annual new home production by 20% over the next two years.
Despite this favorable outlook, the company’s shares continue to offer a wide margin of safety. They are trading at a price / earnings ratio of 10. This suggests that the stock market continues to significantly undervalue the financial position, market outlook and strategy of the builder. Keep buying.
Quaestor says: Buy
Closing price: £ 32.20 p
Update: Segro, Tritax Big Box
Residential housing is not the only booming sector of the real estate market. Seemingly insatiable demand for warehouses supplied by Segro and the sprawling out of town warehouses owned by Tritax Big Box have driven their stock prices higher. They have gained 183pc and 70pc respectively since we toppled them in July 2017 and September 2019. The FTSE 100 was little changed in both periods.
Demand for warehouses was boosted by an accelerated shift to online retail caused by Covid. Indeed, e-commerce sales as a proportion of total retail sales have increased from 19% to 26% over the past two years.
Contrary to the growing demand for warehouses, their supply remains very limited. The lack of suitable locations and competing demands for their use mean that the current imbalance between demand and supply could widen. As a result, Segro and Tritax Big Box’s vast pipelines of space under construction can easily be filled by new tenants.
The latest updates from both companies highlighted the continued impact of high demand and low supply on their performance. They noted low vacancy rates, strong rental growth and high rental collection rates. In fact, Tritax Big Box’s vacancy rate has consistently been 0pc over the past few months. Meanwhile, Segro’s new head rents on review and renewal increased 13% in the first nine months of the year.
In Questor’s view, both companies continue to offer good value for money given their long-term prospects. Price-to-book ratios of 1.5 for Segro and 1.3 for Tritax Big Box suggest further gains are to come.
Quaestor says: Buy
Symbols: SGRO, BBOX
Closing price: Segro £ 13.86, Tritax Big Box 238p
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