7th Jan 2019 13:00
LONDON (Alliance News) - Liberum on Monday viewed MJ Gleeson's successes as more than that of a small growing business than a housebuilder, calling the company "a rare Aldi in a Waitrose world".
Shares in the property development company rose 12% at 735.50 pence on Monday. Liberum currently has a Buy rating on MJ Gleeson, with a target price of 835p.
Gleeson said that its performance for the six months to the end of December would be significantly ahead of the same period the year before due to strong demand for low-cost homes.
"Demand remains as strong as ever from a market segment that is not well served by other housebuilders. Land remains readily available at low cost, and affordability is not a constraint in its areas. The Homes division appears comfortably on track to double unit sales between 2017 and 2022," said Liberum analysts Charlie Campbell and Marcus Cole.
Gleeson Homes sold 691 units during the first half to December-end, up 17% on the previous year's interim total of 593 unit completions.
For the Homes division, Liberum said it left its expectations unchanged, but noted certain risks as the broker's Homes unit completion estimate of 1,400 units for the current financial year is only up to 14%, from over 16% in the first half.
The company's Strategic Land division sold three sites, the same number as the previous first half-year. However, these sites were larger than those sold in the previous period, leading to a rise in the division's profits year-on-year.
The broker said it saw Gleeson as more of a smaller growing company than a housebuilder, with its stronger cash flow profile, limited competition in its market segment and the growth in Gleeson's Homes division driven more by the company itself than the housing market.
"Gleeson Homes sells homes at around GBP125,000 to the lowest 10% of earners in its geographical areas with very limited competition. Low land costs and disciplined build make it a profitable and cash-generative model. Unlike other parts of England, prices in the north are still not much above 2007 levels, which means that affordability is not a constraint," Campbell and Cole added.
Liberum acts as a corporate broker for MJ Gleeson.
Related Shares:
MJGleeson