GFRD - an asset play

Wednesday, Sep 15 2010 by

This looks to be a good asset play.

  • Final results out. All looks ok.
  • Huge jump in NAV as expected
  • Shares in issue - 81.85m
  • Thus at £3 market cap is : c. £245.6m
  • Per consolidated Balance Sheet Shareholders' Equity is £423.2m
  • Thus NAV per share = £5.17.
  • Also, dividend is up 15% and business is doing quite nicely.


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Galliford Try PLC is a United Kingdom-based house building, regeneration and construction company. The Company operates through the segments, including Linden Homes, Partnerships and Regeneration, Construction, public private partnerships (PPP) and Central Costs. Its Linden Homes segment develops private homes for sale across England. Partnerships and Regeneration is its specialist regenration business that works with registered providers and local authorities to supply mixed-tenure housing. Its Construction business includes Building and Infrastructure. Building business is focused on the public and regulated sectors, in the health, education and defense markets. Its infrastructure business carries out civil engineering projects. Its PPP Investments segment delivers building and infrastructure projects through PPPs. The Company's brands include Galliford Try, Linden Homes, Galliford Try Partnerships, Morrison Construction, Oak Dry Lining, Drew Smith and Rock & Alluvium. more »

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7 Posts on this Thread show/hide all

nigelpm 15th Sep '10 1 of 7

Does the lack of response indicate a total lack of interest? Very disappointing if so but then I guess that's why it's trading at a great big discount to NAV.

Some reasons why I like the stock from today's RNS:

Accordingly, we took the decision to secure additional funding through a rights issue, which was completed in October last year and raised a net £119.3 million, to invest in a plan to approximately double the size of the housebuilding business over a three year period, with the objective of delivering a significant enhancement to earnings per share from 2012.

Progress to date has been excellent, with our strong market position across the South of England in particular, and our industry leading expertise in affordable housing and on regeneration schemes, generating the land opportunities. This has resulted in our landbank increasing from 7,850 a year ago to a current total of 9,700 plots, 58% of which has been acquired at current market, as compared to higher historic, values. We are opening new offices on schedule and our management team is up to full strength. We are therefore on track with the delivery of our plan.

i.e. investing in housebuilding at potentially a low point in the cycle.

Reading the rest of the RNS provides a positive story.

Downsides are obvious - lack of government investment in social housing etc.. but their portfolios are broad.

I wouldn't be surprised to see the directors sticking their hands in their pockets for more shares as per:

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hypster 15th Sep '10 2 of 7

I'm interested nigel but am new to value investing (and reading company reports). What is the borrowing/cash situation of the company?

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davjo 15th Sep '10 3 of 7

G'day Nigel

When I see new house-builds rising 4 storeys with the brickwork hitting the internal timber frame halfway up because it's gone up wonky and a gap left at the top covered with a plastic cover strip to allow for subsequent shrinkage and joists comprising of a couple of 2x2s with a length of hardboard glued in between etc. etc., I tend to worry about the quality that's being churned out these days...and that includes GFRD.

When you consider the H&S regs involving internal scaffolding being erected between floors to prevent falling between open joists and bean bags in the roof void for similar reasons plus a mass of other safety rules which I won't go in to here, it's something of a joke when a casual observer would think the contractor displaying such safety diligence must be constructing something wonderful when in fact it's crap.

Absolutely no reflection on the investment case you make but for me I wouldn't touch housebuilders with a bargepole because I don't want to support cheapskate housing built to look pretty rather than to last.

Apologies for being somewhat O/T

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nigelpm 15th Sep '10 4 of 7

Best way to find this info is look at the balance sheet, each line should make sense but basically current liabilities is anything the company owes within a year i.e. trade payables and non-current is >1 year i.e. longer term borrowing.

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nigelpm 22nd Sep '10 5 of 7

Appears to be starting to make inroads upwards at last!

Still can't understand the cheapness albeit there are a large amount of intangibles on the balance sheet which I hasn't fully appreciated.

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wistman 10th Dec '10 6 of 7

In reply to nigelpm, post #5

Galliford Try are setting up a new division down here in the deep SW to pick up some of the affordable housing work of ROK, who went bust recently.

I've bought a few as a sort of Chrismas punt, looking for a quick 10-15% as Galliford Try are one of my two favourite builders, the other being Bellway (no holding).

Generally though, I completely agree with Davjo and have avoided builders in recent years apart from the odd opportunistic trade like this.

It is quite interesting to look back to the early 2000's, when a 20 year old semi in a small SW town/village could be bought for <£90k. At that time quite a few builders traded on a P/e of between 4 and 6, had cash or little debt,
paid some sort of divi, (say between 2% and 6%-Bovis had a good Divi) and traded at a substantial discount to net TANGIBLE assets. What's more, the assets often consisted of a lot of land at rather out of date valuations, so there was a kind of hidden discount.

The really interesting difference though, is in margins. From memory, some of the better run builders (e.g Bellway, Ben Bailey, but also Wimpey etc) had margins in the region of or better than 20%. Even Crest Nicholson who did a lot of social housing, had a 13% or so margin.

Now, I think 4-6% is about par, which leaves little margin of safety if the housing market gets wobbly again.

Of course in the event of a market slump, well run firms with good balance sheets, especially with little debt will be able to pick up assets on the cheap from casualties.(Bellway, Gallford Try and perhaps Bovis will probably benefit).

But still my general view is that there will be a better time to start buying builders.

Just by the way, I think net asset value is a completely useless figure in trying to value any business, as it often includes shedloads of "Goodwill". If net asset value is relevant at all then it must be the based on the tangible assets, bearing in mind that there may be quite a gap (either way) between the book value of assets e.g.plant & machinery, and what they would actually fetch in the event of a sale of the business.


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nigelpm 8th Feb '11 7 of 7

Not sure what's been driving this of late but then the housebuilding sector has been up as well so maybe just a bit of that and ramping on the fool :


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