The Investment Column: Resist urge to take profits at builder Wilson Bowden

White Nile will be a white-knuckle ride
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The Independent Online

All the UK's housing market experts have been lining up to give us their predictions for house-price inflation in 2006, and they appear to be settled in a relatively narrow range. Halifax forecasts 3 per cent, Nationwide between 0 and 3 per cent, the Royal Institution of Chartered Surveyors goes as high as 4 per cent, Hometrack's researchers go as low as 1 per cent. All in all, however, a modestly positive outlook.

It is no wonder that the market, so wobbly and unpredictable through the past 18 months, has "picked up significantly" during the past 11 weeks, according to the housebuilder Wilson Bowden. The company reported yesterday "a marked change in buyer confidence", and saw its shares chased more than 5 per cent higher to a record 1,466p.

This column has long predicted a re-rating for housebuilding shares, once the City becomes confident that there will be a soft landing for the housing market and the industry proves that it is better financially equipped to deal with a period of quieter trading than in the last downturn. Now that the re-rating is clearly under way, we are wondering if we should start to feel nervous. Wilson Bowden shares are up 30 per cent in two months. Too much already?

The recent acquisition of Westbury by Persimmon valued that ailing company at a one-third premium to the value of its assets, about the same as the much more robust Wilson Bowden at last night's share price. The Westbury deal may yet turn out to be an opportunistic one-off, rather than the starting gun for a round of consolidation in the housebuilding sector that will see Wilson Bowden itself being gobbled up, but it does at least put a floor under share prices. In Wilson Bowden's case, shareholders also have a 3 per cent dividend yield.

The company has chosen to miss its targets for numbers of home sales, rather than accept sales at any price, and it has also cut the proportion of its forthcoming properties, which are flats, and therefore more exposed to the volatile buy-to-let market. This proportion is 34 per cent, less than the market average, and Wilson Bowden's shares sit at a below-average multiple of assets, too.

Investors should resist the temptation to take profits.

White Nile will be a white-knuckle ride

White Nile has been one of the most extraordinary flotations of the year. A shell company chaired by Phil Edmonds, the former England cricketer, it was set up to "identify and acquire projects in the natural resources sector with particular emphasis on oil projects within Africa", and is 50 per cent-owned by the government of newly autonomous South Sudan and exploring for oil across 67,000 sq km of the region.

It is difficult to think of a more risky venture on the stock market. There is a commercial opening here because South Sudan has just emerged from a 20-year civil war with the central government in Khartoum. But Sudan remains a volatile country (with a genocide being committed in the west) and even the south is only half a generation on from a vicious internal war.

Total, the French oil giant, is still claiming exploration rights to the same land as White Nile, citing an agreement with Khartoum, but it is White Nile that has the alliances with the people who matter at the moment. So it is White Nile that has appointed consultants to begin seismic studies and appointed project management. From a geological perspective, White Nile's is a relatively low-risk, high-reward project, but the political risks are sky high. The company has diversified a little, with an exploration project in neighbouring Ethiopia under way, too, but this country is also on the outer fringe of what constitutes emerging markets.

Potential investors might be further put off by issues such as the super-cheap "founder shares" offered to Mr Edmonds and others before flotation, and by the length of time it took to file yesterday's maiden results (with nine days to spare legally) - the sorts of issues that City fund managers often examine to sort the best from the worst of the AIM-listed mining companies. Avoid.

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