Housebuilders have a long way to go before reclaiming the heady Help-to-Buy heights of the pre-Covid era, but the cards are beginning to look more promising if Bellway PLC (LSE:BWY)’s latest results are anything to go by.
Bellway this Friday (slightly) exceeded its completion targets, but the real story is in what happens next.
Chief executive Jason Honeyman suggested that looming interest rate cuts, combined with Labour’s pro-growth approach to the housing sector, will be a boon to the company’s forward order book in the year ahead.
Bellway’s valuation, meanwhile, is beginning to reflect this.
As Russ Mould, investment director at AJ Bell, pointed out: “The stock market is not (and cannot) always be right, but its views must always be respected and right now the share price chart for Bellway suggests that investors believe a gradual recovery in the UK housing market is underway.”
He added: “The profits and dividends of the glory, glory, Help-to-Buy-fuelled days of the late 2010s may not be repeated in a hurry but Bellway’s trading statement flags improved reservation rates, a higher order book and expectations that completions will start to grow in the fiscal year to June 2025.”
While profits are not expected to highs seen in the late 2010s, “the prospect of a solid, if as yet unspectacular recovery, is reflected in Bellway’s valuation”, according to Mould.
“The stock may not look too attractive on the basis of earnings or yield, but both profits and the dividend are relatively depressed thanks to the downturn, so appearances may be deceptive.
“On the basis of net asset, or book, value per share, however, Bellway is one of just two quoted housebuilders whose shares trade at a discount– accident-prone Crest Nicholson is the other, which may be why Bellway is trying to buy it, to boost its land bank and position itself for the next housing upswing as swiftly as possible.”