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This promising little house builder is really bringing home the bacon, with a land bank that is growing is scale and quality, writes Mark Watson-Mitchell.
Just over a week ago, Inland Homes (LON:INL), my favourite brownfield developer, housebuilder and partnership housing company announced a trading update for the 15 months to the end of September.
It marked a period of substantial progress across the group’s operations. It also saw two of the group’s major sites getting appropriate permissions after lengthy timeframes.
It took five years of work on its 100-acre Wilton Park former Ministry of Defence site at Beaconsfield, Buckinghamshire, to eventually gain planning consent in the period for 304 new homes and 1,730 square metres of commercial space on what could well be a £350m development.
There could also be a further development possibility at the site for another 250 homes and an additional 18,500 sq. metres of commercial space.
The company also took three years in gaining planning consent for the former Tesco site next door to the station at Cheshunt Lakeside. They have permission for 1,725 homes and 19,000 sq. metres of commercial space on what could well be one of the largest brownfield developments in the south-east of England.
The Cheshunt development could have a development value of over £650m.
The group has stated that it is currently evaluating several routes for it to develop those projects in order to maximise shareholder returns.
The group’s land bank now stands at a record 7,796 plots, some 3,068 of which have planning consent. Those figures compare with the 2018 year’s totals of 6,870 plots, of which 1,547 plots were with planning permission.
The company’s growing strategic land portfolio, largely on ‘discount to market value’ options, has grown massively, now at some 3,533 plots. The group enjoys a good success rate in getting sites into local development plans.
Now, this is a staggering fact – the gross development value of the group’s entire land bank now exceeds £2bn. That compares with its current market capitalisation of just over £160m, which really does show the future potential for the company over the coming five years or more.
The company builds open market and affordable homes on its sites, as well as trading off various chunks of surplus property with enhanced plot values to other developers, thereby generating cash for further development.
It sold 577 plots during the 15-month period, compared to 837 plots sold in the 2018 year.
Its 200 open market completions in the period were down 75 on the previous year. However, as at 15 October the company had £41.6m worth of forward sales booked compared to £20m in 2018.
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Overall, the group has a very good balance in its activities. It has several partnership housing projects underway with more to come. It also has homes for private sale, as well as selling off consented building land. In addition, it enjoys a useful £2.6m plus yearly rental income as a by-product of its activities.
The demand from housing associations for delivery of ‘turnkey’ projects is very strong currently, so the land bank will help to satisfy future developments.
It is also expecting to secure the first build to rent opportunity early in the current trading year.
The full period results will be announced sometime in January next year. It is perhaps too early for any profit estimates for the 15-month period and going forward. Even so I remain incredibly bullish about this group.
It is extremely well managed by very professional operators, who have shown their growing abilities before (when they built up Country & Metropolitan Homes before selling it off to Gladedale in 2005).
They are really pushing their group sensibly into the near future, and big profits are ahead without doubt. I see revenues rising to around the £200m/£250m levels, while between £20m to £30m doesn’t look unreasonable for pre-tax profits over the next few years.
Just think about the £2.6bn value of its land bank in relation to its tiny £160m market capitalisation – that instantly shouts totally undervalued!
The shares are currently trading at around the 77p level, at which I continue to rate them very highly. My target price is 110p, which I really do think is a very realistic goal.