Investment Column: Dynamic approachand a firm foundation pays off for Bellway

UBM; Interserve


Our view: Buy

Share price: 698.5p (21p)



"T he 100 per cent mortgage is back," screams Bellway's website. Of course, there's going to be small print. But house-builders have had to innovate and this has seen them getting much more actively involved in home financing.

It seems to be paying off for Bellway, which yesterday unveiled creditable results for the year ending 31 July. Completed sales stood at 4,922 homes against 4,595, turnover at £886.1m against £768.3m and pre-tax-profits at £67.2m against £44.4m.

Crucially the £175,613 average selling price achieved is well ahead of the £163,175 of the previous year. And the group felt able to increase its dividend to 8.8p from 6.7p.

In line with Hometrack's figures earlier this week, the South was the star in terms of prices with northern developments treading water. But operating margins also increased – while others are facing up to sharp rises in raw material costs, Bellway's are negotiated 12 months in advance, smoothing volatility. It has also been able to negotiate with contractors from a strong position. With building work still limited, contractors must price keenly to snap up what is available.

Costs still face pressures (regulation, etc) but Bellway is nonetheless in an enviable position. And we don't think house-builders are a bad place to park one's money, with the sector having made efforts to cut costs, reduce debt and build up banks of cheap land. Britain also still faces a shortage of housing and even though the economic outlook is poor, interest rates are set to stay low, while people who have sat on their hands, putting off moving or buying, are starting to trickle back into the market.

What's more, Bellway trades at an enormous discount to its net asset value per share, forecast by Panmure at 921p for 2012, although the forecast yield ( 2 per cent) is nothing to write home about.

On the downside, Bellway has faced criticism over its executive remuneration policies. For us that is a black mark. But we think Bellway is looking cheap now and merits a buy (we held at 760p last March). We'd just urge investors to vote at the annual meeting.

UBM

Our view: Hold

Share price: 481.8p (+16.6p)



The media sector is usually the first to feel the impact of a chill, but while UBM's share price has been undergoing an alarming slide, there aren't any signs of a downturn in the numbers. Yet.

Yesterday's nine month trading update was remarkably encouraging given the recent economic news. Revenue was up by 9.8 per cent to £706.2m. The events business was a star (revenues up a stunning 26.6 per cent), although print (sadly) continued to struggle (revenue down 17 per cent).

What makes UBM worth keeping tabs on is that it has been steadily shifting its portfolio. The declining print division is less important, while 22 per cent of revenues now come from (so called) emerging markets. Which ought to provide it with some protection should Western economies sink into the mire.

On valuation grounds, UBM is now looking cheap after the struggles its shares have been going through, trading at just 8.5 times full-year earnings while offering a cracking prospective yield of over 6 per cent, although the £51m net debt is higher than we'd like (it is at 2.4 times earnings before interest, tax, depreciation and amortisation).

We said hold in April at 537.5p. But because of the economic outlook we're still wary of upgrading to a buy, even if the valuation looks increasingly compelling. All the same, this is no time to exit, not least because of that yield.

Interserve

Our view: Buy

Share price: 309p (-1.4p)



It's a hard life being an analyst. The scribblers who keep watch on Interserve are enjoying the sun out in Qatar so they can get a look at the operations the support services, maintenance and building group has in the country that will controversially host the 2022 Football World Cup.

Controversy over prestige events aside, what should interest investors about Qatar is that the country is forecast by the IMF to be the world's fastest growing economy in 2011, with a GDP growth rate of 20 per cent and plans to splurge $225bn (£143bn) on new infrastructure between 2011 and 2016. Not a bad place to be for Interserve, then.

With expanding businesses in other growing regions (eg, Australia) Interserve has felt comfortable with reiterating its pledge to double earnings over five years. It's working in the right places and the right sectors (such as energy) that will help cushion it from the turbulence in this part of the world.

We were buyers at 223.8p last year, so the shares have done very well for us. But they remain distinctly under-valued at 6.6 times forecast full-year earnings while yielding 6.2 per cent, a yield which doesn't look under any threat, not least because payments to fill a hole in the pension scheme are predicted to fall quite sharply. Buy.

News
peoplePaper attempts to defend itself
Voices
voicesWe desperately need men to be feminists too
Life and Style
food + drink
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits