A poor update from FOXT today, but it includes 'Lettings revenues in Q4 were circa £13m (2015: £13m) and have remained more resilient, benefiting from our high levels of renewals despite lower levels of new tenant activity and some downward pressure on rents arising from increased stock availability. Our lettings business remains a consistent and recurring revenue stream'.
People still need somewhere to live, and as prices rise the rental sector will grow. A statement about the Chancellor's intentions reckoned an 8% dropin revenue as a result. Even double that is sustainable.
Here we have a PER of 11, a yield of c5%, negligible debt, and a resilient franchise model. One for the bottom draw at current prices? (Are MCO and WINK in a similar sitiation? BLV benefits from having a wide geographic spread}.
"Philip Hammond's first Autumn Statement as chancellor has attracted plenty of criticism, not least for the Office for Budget Responsibility's (OBR) estimate that Brexit will cost the UK up to Â£60 billion. There's some scepticism around ..."
The ban on letting fees was an unexpected blow and will remove a valuable source of income at some stage. I expect that letting agencies will create an alternative way to charge landlords or tenants for services rendered, that may not be described as "letting fees", but it is most likely that the outcome will be an increase in rents. The government's tinkering will yet again invoke the "law of unintended consequences" with the end user being the one who pays.
There is a time lag until rent increases begin to kick in, whilst leases and tenancies come up for renewal and letting agencies will have to wait before they see any gradual benefit to income, not to mention the tenant's resistance to such rent increases. Hence the drop in share values. The long term investment case is still strong but for now, it may be better to wait for better buying opportunities at lower prices.
If interest rates go up, to add to the high deposits required, mortgages will become much less affordable or even obtainable. That will lead to an increased demand for rental property, as the alternative way of setting up a home. Buy to let will increasingly become the province of limited companies and bigger operations, as tax issues freeze out the small landlords, which is probably what the government wants as it is easier to regulate and brings more professionalism to the rental industry. Increased demand plus an element of inflation, will force rents upwards.
Belvoir is very well placed to take advantage of this trend and the company's income will be going only one way - upwards. Controlling the expenses and running a tight ship will be the key to increasing profits.
There will probably be more opportunities to buy up smaller agencies. I like the way the company is heading and can see considerable growth in the offing.
I rent out my flat and demand for rented property has surged in the last couple of years. I've had the same tenant for a while so I can't raise rents too much but I'd estimate that rents are rising by 7% a year in my area (Eastern England).
That will change if the economy nosedives and all the Eastern Europeans go home (most of my tenants have been Polish).
I also rent and in my experience Belvoir are one of the better letting agencies around. Mind you, that's not saying much.
Government meddling in the market is great news for landlords and letting agencies.
Correct me if I am wrong, but has the share price taken a short term dive without considering the longer terms effects of Osborne's persecution of buy to let investors. Certainly new entrants will now be discouraged. That reduces supply. Some existing investors may even sell, (which generates a fat commission) perhaps to other existing clients (thus retaining the business). The number of would-be tenants is still rising so increasing demand against a rather
static supply - the consequence must be that rents will rise and capital values alongside that.
Belvoir must be in prime position to exploit that. When it dawns on the market that in the longer term, this stock (and similar ones), will be a winner, the short term fall will reverse.
Share dilution has had an effect but Belvoir has cash in hand and the monthly profits are still rolling in. The extra branches which the company acquired will surely prove their worth as the months tick by because both the market for the service, the volume of tenants and the prices chargeable look set to go only one way: - upwards. This seems like a long term sound buy with a decent dividend. Results due at start of April - just as Osborne's new rules kick in, so that might be the perfect time to buy. What happens if Osborne changes his mind ?
Sold out, fortunately before the latest acquisition. The only point in holding this share was the dividend yield, but since July two acquisitions funded by placings to dilute share base, because of insufficient accumulated and retained profits. Was 24million shares costing 6.8p per share at uncovered 5.6 EPS, or £1,633,000.
Since July 3.24m placed at 125p and now 3.1m placed at 116p, meaning an extra 6.34m shares or approx 26% more. Where will money come from to pay necessary £425,000 just to maintain existing level of dviidend as both deals are stated to be earnings beneficial from next year.
Further drag on performance, apart from the bank debt, is over £4million in soft loans made to some franchisees. I cannot support this management further.
As Martinco and Belvoir both reported interims today, confirmation this is the laggard. Whilst MCO shares high new high after MSF up 61% and operating margin up to 38%, its 284 offices (193) service 44,000 properties (31,000), helping revenue rise 48% and profits 53% - allowing dividend to rise from 1.3p to 1.8p, on eps of 4.2., meanwhile on a market up day Belvoir SP unchanged
We can but dream of such riches here, as management feebly blames the Election for no nett rise in offices in six months and flat profits on MSF rise of 14%. Embarrassing to see they are proud nearly 35% of offices now offer estate agency, as MCO hits 80%. EPS here only 2.5 against 3.4 dividend, but management confident of strong second half after launching the multi brand strategy and buying extra name with 30 offices post period to reach a new total of 197 (wonder where they got that idea). At least there were no major embarrassments this time (FD got a grip?) and liabilities edged downwards again, but still capital tied up in loans to franchisees for expansion.
The optomists may say that if we follow every success by MCO, eventually we will succeed. For now remains a long-term stodgy income possibility.
Again a mixture, but signs company heading in a better direction. Liabilities down £2.25million, revenue and profits up, headline 11% rise in management fees against 10% target.
However, with EPS of 5,8 pence, and paying a same amount 6.8 in dividends cannot be sustained. Smaller amounts "wasted" on paying off another Director and bad debts. Not so surprising is that the policy of lending franchisees 100% to start has been cut to a better and more diverse 30/40% maximum area - perhaps the new FD is earning her pay.
Poor cousin to Martinco, which stormed ahead this year, but if regarded as a steady eddie the natural annual growth of offices and rents should make EPS surpass the dividend soon and be a decent little income share.
It is to be hoped that the new Finance Director will get a grip and not sanction pay offs to failed Directors who desert to run other interests within a year, nor dodgy loans that are not repaid.
There was progress with reduced borrowings, profits up and reduction but not elimination of owned franchises (a model long since ditched by Martin & Co as capital inefficient). MSF scrapped over 10% again, no further Director changes or self inflicted bungles noted. With luck (a lot?) this set of results may close the amateur era and the group can move onwards.
As I wrote previously, adding a dozen or so outlets a year, the selling avenue and less drama will start to generate decent returns over time as an income share, though for now 6.8p eps on the larger share base will be target enough to attain. May take a while on this course for the fog to lift and reveal bel views.
Having sold out in September at 167p, watched fascinated as the chickens came home to roost here. The warning was there, crowing about the share price rise from 75p at launch in the 2012 results, followed by the inexplicable decision to dilute investors by a £5m fundraise at a discount to institutions of 160p from the prevailing 175p. What were these millions used for, if they have yet been spent?
Having upset PIs then the insurance broker change and delayed payments peeved the shop owners and the MSF miss at 8.8% instead of promised 10% minimum saw the share price plummet and in turn hacked off both PIs and the institutions. Huge percentage of weakened EPS paid out as dividend. Musical chairs with the Directors means the third, fourth or is it fifth CEO now. This is amateurism writ large, something you may get away with in a private company but not in a quoted one.
All this disguises the underlying success story of a solid property company which at 120p is a buy, provided everyone calms down and concentrates on the basics. The natural growth of existing branches, plus a dozen or so new per annum and a smidge of sales could be an unexciting income play and that is why I have returned.
Bought last year soon after launch, Makes a good fit with M Winkworth, which is franchise estate agent, mainly in London. Each is making solid progress and their respective financial models holding up nicely. When acquired both paying 4% + dividends and are plays on the continued irrationality of ultra cheap credit feeding high house prices in the South East. This phenomenon hampers first time buyers seeking to leave rented property. Whilst not necessarily socially desirable, another result is buy to let investors getting "cheap" mortgages, in the belief (mistaken?) there will be capital growth as well as an income surpassing other savings routes like bonds or building societies.
For the benefit of anyone unfamiliar with the company, it is pronounced Beaver.
I think these have very good prospects in 2013, recently tipped at £1.16 in Investors chronicle they have already enjoyed a good run since flotation earlier in the year.
Strong management and strong outlook for lettings industry, with an excellent franchise operation. A relative of mine is a franchise holder and has enjoyed a lot of success in the last 2 years. I have invested as I see a lot of growth potential here.
DYOR would be interested to hear views of others....
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