Singing the praises of homebuilders is something that’s being done to death, at least as far as this writer is concerned. They provide the perfect blend of big value and, in some cases, even bigger dividends. It’s why I own Barratt Developments (LON:BDEV) and Taylor Wimpey (LON:TW) and I’m considering loading up on some more.
Another brilliant builder that’s on my radar is MJ Gleeson (LSE: GLE), and particularly so with new trading details just around the corner on July 4.
The resignation of Jolyon Harrison as chief executive this month, prompted by a row over the size of his paypacket, has really shaken investors. The company’s share price has fallen by almost a fifth in June, a re-rating which suggests a gross overreaction by market makers.
For one, the small-cap is replacing Harrison with a safe pair of hands in former head of Keepmoat Homes, James Thomson, someone who will keep things afloat in the immediate term at least.
Secondly, Gleeson is not as dependent upon their ex-leader as it was during the company’s upscaling programme of a few years back. And thirdly, because of the UK’s gigantic shortage of new homes, the long-term profits outlook for the business remains a compelling one.
Sales are booming I’m fully expecting Gleeson to remind the market of this when it comes to releasing those fresh financials, something which could well prompt a heavy share price rebound. It certainly impressed last time out in February when it advised revenues boomed 53% in the six months to December, to £118.3m. That upswing was driven by a double-digit rise in unit sales and an increase in average selling prices.
I tipped Gleeson’s share price to jump in the run-up to those half-year numbers and I’m expecting nothing less this time around either. Indeed, the steady stream of positive updates from across the homebuilding sector reinforces my expectations that there’s been no change in those favourable trading conditions.
I’d buy today and never sell With or without its veteran chief executive, City analysts certainly don’t see Gleeson’s long record of chunky annual earnings growth being blown off course any time soon.
They’re anticipating an 11% bottom-line improvement for the year about to start (to June 2020), following on from another double-digit-percentage rise in the period that’s about to expire. And this means dividends are expected to keep rising too, resulting in a jumbo 5% yield for the forthcoming period.
Gleeson clearly isn’t a share for the here and now. Its efforts to turbocharge build rates puts it in the box seat to ride the homes shortage that’s driving newbuild sales. In my opinion, it’s a great share to buy today and hold for many years to come.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019