Is Taylor Wimpey due a re-rating?

14th Sep '20 by Retireyoung

9 comments 948 reads

Hi All,

I am wondering if Taylor Wimpey (LON:TW.) share price deserves the hammering it has received this year, and whether it could be re-rated making it a good medium-term investment. I know the UK construction sector has suffered during Covid, and that incomes/jobs are precarious,. However, a few positives: signs from other developers and housing-related sub-sectors are that orders for new houses are up; the Tory government seems solidly behind the sector with buying and development incentives; the British public's obsession with house ownership might prove resilient despite a potential long-term Covid/Brexit-recession. TW. seems to have done particularly badly since it issued more shares to raise capital for land acquisition - understandable given share dilution is never taken favourably by shareholders. However, it seems like a solid company, with a strong balance sheet and good history of profitability, growth and dividend increases.

I would love to hear views/analysis on this from those of you owning/watching this share.

Thanks in advance!

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Snowbum

14th Sep '20

I used to own and sold but have been keeping an eye on it at current price level too as it is around my previous entry price. .. I remain interested as my initial purchase was the day after Brexit vote in 2016 and i did quite well off the bounce with nice divis for a few years before selling sometime in 2018, could be a chance to repeat the process? Personally, I'm waiting to see if the recent low in April holds initially before I'd even consider buying in again. Chart looks like it could be putting in lower lows since 2016 so I'd like to see that stop.

Anthony127

15th Sep '20

I certainly believe that Housebuilders in general are due for an upward re-rating. There have been so many occurrences which have made people put their property moves on hold. First there was Brexit, then last years election swiftly followed by Covid 19.

On this basis I believe there is a lot of pent up purchasing which has been delayed and still due to happen. Added to this I believe that the Government will continue to be supportive in house building policy partly because it is such a significant part of GDP and generates significant related expenditure.

The question is what is the best Housebuilder to profit from what could be a significant secular trend over the next few years. A rising tide does lift all boats but some will do better than others. Taylor Wimpey's results over the last few years do not seem particularly impressive and I prefer to see companies that are more resilient during difficult times. In that respect I think I prefer Redrow (LON:RDW) which has grown its 5 year CAGR Book Value per share by 19.1% far outstripping Taylor Wimpey (LON:TW.) An alternative if more speculative company is Springfield Properties (LON:SPR) a small Scottish Housebuilder which has a 5 year CAGR Book value per share of 30.2%.

Book Value Per Share is not a ratio often discussed but I think it fairly relevant in Housebuilding as the Price/Book value ratio tends to go higher as the business cycle advances and Housebuilding profits increase.

Retireyoung

Thank you. I already own Redrow and a great tip on Springfield, which looks very cheap considering performance. I will keep an eye on it.

UK_Investor_8888

I'm in the process of selling and then buying a dream house... at the top of the market!

Newspaper reports of a 2021 housing crash are about as unwelcome as a large tax bill right now.

I sold my Taylor Wimpey (LON:TW.) @ 151 (currently 112) and my Persimmon (LON:PSN) @ 2475 (currently 2525). Its a tricky one to judge. Persimmon (LON:PSN) seems to be the darling of the builders. £TW diluted its shareholders slightly recently. Its a big lottery on whether the recession is long and hard or short and soft. I don't know, but I'd gamble that the economy/shares will do better rather than worse. Frustrating that I can't buy shares right now.

Already own Redrow (LON:RDW) and I'm -16% so still waiting for a recovery.

I like Persimmon (LON:PSN). with its 8% yield and StockRank of 98.

Blissgull

One of the reasons for the weakness in the shareprice is that Taylor Wimpey are facing legal action over the misselling of leasehold properties. Other housebuilders are also affected including Barratt Developments, Countryside Properties and Persimmon Homes but TW seems to be the one in the firing line.

At this stage it is not really clear what the potential costs and damages might be.

17th Sep '20

Big drop in Redrow (LON:RDW) 's StockRank today.

18th Sep '20

Mercifully, my Redrow (LON:RDW) holding is only £10K.

Horrifying reranking occurring on Stocko for RDW again today.

StockRank now 52 down 38 in 30 days
Q 42 down 42 in 30 days
V 79 down 10 in 30 days

Not good, to go from a 90+er to a nnnaaaahhhhh so quickly.

21st Sep '20

God... holding on to these housing stocks is painful... really dragging my portfolio down. Is there an end to the declines in sight?

7th Oct '20

Hopefully Taylor Wimpey (LON:TW.) has now hit the bottom and is on its way back up, backed by increasing house prices and record mortgage applications.

Is Taylor Wimpey due a re-rating?

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Retireyoung

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