Property & Construction Daily

The Property & Construction Daily provides a sector-specific comment from leading analyst Alastair Stewart. His daily perspective provides a round-up of market statements, news, economics and views from the property and construction sectors.

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March 8, 2024

WJG, SOHO, KINO | Fortnight ahead

Company news

Watkin Jones (WJG, 47p, £120m) – WJG is a client of PERL

Residential for rent developer and manager in the build-to-rent (BTR) and student accommodation sectors. Forward sale forward sale of a new 260 bed purpose-built student accommodation (PBSA) development at Gas Lane in Bristol to Hines, acquiring on behalf of the Hines European Property Partners Fund. The contribution from this sale is reflected in the group’s current financial guidance, with an overall scheme margin expected to be in line with current target returns. The transaction will generate day one cash receipts of c. £11m, net of repayment of the associated debt of c. £5m. As part of Bristol Temple Quarter, one of the UK’s largest urban regeneration zones, it will transform the current brownfield site at Gas Lane into a new student community, helping to support the new University of Bristol Temple Quarter campus. The scheme is targeted to complete in time for the start of the 2025/26 academic year.

Outlook: “This transaction gives us confidence that sentiment in the institutional market continues to recover. As the market shows further signs of improvement, we are well-positioned to capitalize on this given our position in PBSA and Build to Rent, two of the most attractive asset classes in real estate”.

Triple Point Social Housing REIT (SOHO, 58p, £229m)

Real estate investment trust investing primarily in newly developed social housing assets, with a focus on supported housing. FY (Dec) results. Portfolio value, IFRS, £678m (FY 22, £669m); EPRA/IFRA TNAV, 113.8p (109.1p); EPRA net initial yield, 5.57% (5.46%); loan to value, 37.0% (37.4%); rental income +5.1%, £41.0m); adj EPS -5.3%, 4.61p); div unch, 5.46p.

Trading: “The group delivered strong rental growth, which along with the continued growth in demand for Specialised Supported Housing, helped to preserve the value of the group’s well diversified property portfolio over the last 12 months”.

Outlook: “Triple Point SOHO is well positioned to continue to play a leading role in moving the sector forward through the rollout of our new risk-sharing clause and Eco-Retrofit pilot programme. Looking ahead, we take comfort from the robust fundamentals of the sector which, together with our inflation protection and fully fixed debt, positions the group to continue to deliver shareholder value through the fulfilment of our long term strategy while providing good homes to people with care and support needs throughout the UK”.

Kinovo (KINO, 47p, £30m)

Property services provider, formerly Bilby, specialising in compliance and sustainability. Update on DCB Discontinued Operations. “The group continues to make positive progress towards concluding the remaining projects relating to DCB Kent, its former construction division, with a further four sites having their build completed subject to only final minor snagging checks. This means that a total of seven of the nine projects will soon have been concluded and before the end of Kinovo’s financial year. As announced in our previous update on 9 February, the penultimate project is expected to be build complete by the end of May 2024 and discussions continue regarding the final project (due to complete in 2026). These nine projects have been affected by a number of unforeseen and legacy issues, arising from poor quality workmanship with most only becoming apparent on final commissioning and surveys at the sites as they approached completion. These issues caused damage that required significant remedial action with additional costs, causing associated project delays which were, in certain instances, exacerbated by one of the wettest winters on record. Consequently, with most of the outstanding projects now completed, the Board has assessed that the pre-tax net cost to complete all the DCB projects has now risen by a total of £2.9m from the £5.7m highlighted at the interim results issued 28 November. This includes a bond with a value of £0.9 million, on which Kinovo has now received a formal demand, in relation to the final project. A significant majority of these net costs have already been paid, with the remainder expected to be funded from the strong cash generation from the underlying operations and existing finance facilities to manage the cashflow dynamics. In accordance, the Company maintains the support of its banking partner, HSBC UK Bank”.

Outlook: “The Company looks forward to bringing these DCB legacy issues to a conclusion whilst the continuing business performs well, demonstrating robustness, resilience and growth. The continuing business is performing strongly during the peak trading season and the Board continues to anticipate the outlook for the full year ending March 2024 to be at least in line with that provided on the 9 February”.

Fortnight ahead

240308 – Fortnight Ahead
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