These cycles can take a long time to come round, especially if rates stay higher for longer. That said, being bank debt-free gives Springfield more flexibility to manage through the cycle, with less cash going out in interest and less refinancing risk.
As you state the nth of Scotland is still open for debate. Am concerned that there could be some slips twixt cup and lip, especially on the leasing of the properties. Would the highland and islands underwrite and be a guarantor to take them at end lease for social housing
I don’t believe there’s a formal guarantee, so some end-lease and execution risk clearly remains. That said, the regional housing shortage and the range of potential exit routes after the lease period give me some comfort. At c.98p, I’d argue the share price already reflects a fair amount of that uncertainty, although clearly management still need to deliver.
Fair point. BTRW in theory should be safer and more geographically diversified, and eventually all housebuilders should benefit from a recovery. We’re all guessing a bit on true NTAV, as land values depend on cycle, planning and demand. My angle is asymmetry: SPR is c.£117m vs BTRW c.£3.6bn — so Barratt is roughly 31x larger by market cap. SPR is debt-free, and Barratt already paid c.1.3x book for some of its land. Maybe Barratt will take this out someday too :)
Agreed, it probably doesn’t clear the hurdle on a simple move back to NTAV, but I think there’s optionality from NTAV growth and a potential re-rating if the infrastructure narrative starts to builds traction. Also, I don’t currently have many sub-£50m racier-type ideas on my radar, and I’m going to have around £20k of cash to deploy, so I felt this was a better place to park some of it for time being.
The last time they traded above net asset value was January 2022. Shows just how long the cycles can take to come round
These cycles can take a long time to come round, especially if rates stay higher for longer. That said, being bank debt-free gives Springfield more flexibility to manage through the cycle, with less cash going out in interest and less refinancing risk.
As you state the nth of Scotland is still open for debate. Am concerned that there could be some slips twixt cup and lip, especially on the leasing of the properties. Would the highland and islands underwrite and be a guarantor to take them at end lease for social housing
I don’t believe there’s a formal guarantee, so some end-lease and execution risk clearly remains. That said, the regional housing shortage and the range of potential exit routes after the lease period give me some comfort. At c.98p, I’d argue the share price already reflects a fair amount of that uncertainty, although clearly management still need to deliver.
Good article. If you want house builders with a discount to NAV why not just buy £BTRW, at 0.6ish x book. More juice to the upside
Fair point. BTRW in theory should be safer and more geographically diversified, and eventually all housebuilders should benefit from a recovery. We’re all guessing a bit on true NTAV, as land values depend on cycle, planning and demand. My angle is asymmetry: SPR is c.£117m vs BTRW c.£3.6bn — so Barratt is roughly 31x larger by market cap. SPR is debt-free, and Barratt already paid c.1.3x book for some of its land. Maybe Barratt will take this out someday too :)
Good response. I assume this just doesn't clear your hurdle rate though?
Agreed, it probably doesn’t clear the hurdle on a simple move back to NTAV, but I think there’s optionality from NTAV growth and a potential re-rating if the infrastructure narrative starts to builds traction. Also, I don’t currently have many sub-£50m racier-type ideas on my radar, and I’m going to have around £20k of cash to deploy, so I felt this was a better place to park some of it for time being.