The story of the quoted house builders over the past year, which has driven share prices
substantially higher across the sector, has been one of continuing improvement in margins as land bought ahead of the economic downturn was gradually built on and traded out. The exception, because of its history, is Crest Nicholson, dealing in the shares
of which started officially yesterday. Crest was taken private by HBOS in 2007; as part of a subsequent refinancing in 2009, the value of its land bank was written down to its worth then in the market. So the company is already enjoying a level of operating margin, at about 18%, that its peers are still striving towards.
The Crest proposition, and the attraction of the shares, is that it has the largest land bank in the sector, about nine years' worth at present levels, 95% of it in the affluent South East. None of this comes terribly cheap. Today's share price compares with the most recently published net asset per share figure of about 154p, so the shares are selling on a thumping premium to NAV. They may need a little time to make further headway. Hold says Tempus.
BG Group's is facing two transformational choices. The first refers to the sale, or not, of part of its Brazilian interests to China's Sinopec for $20bn or more. The second has to do with the need to invest billions in Queensland, where BG's budgeted capital spending now runs at $20.4bn. The above decisions are all the more important in light of the company's reduction of its estimates for oil production over the next couple of years. This month it forecast 630,000 to 660,000 barrels of oil equivalent a day in 2013 in Brazil, so it is possible that it could even undershoot last year's 658,000.
Even so, HSBC estimates that BG should be close to break-even in 2015 and The Times's Tempus suspects that neither of those two decisions will be taken much before then. BG's share price, up 4 ½p at £11.46 ½ last night, is a long way short of its estimated net asset value of £19 a share a valuation more appropriate to a mature oil business than a growth company. The priority will be to narrow that gap. Brazil is going sufficiently well that there is no real point in selling down now. Hence, Tempus continues to believe that BG's share price lags well behind its true value.
Is the company pursuing a new strategy or simply realigning itself geographically? That would seem to be the question which investors are trying to answer, without much success so far, with regards to UBM. Hence, shares have recovered from the drop following the announcement of the sale of the firm's Delta data services division earlier this month. Those assets were sold for £160m - well below the £300m which some had expected it to fetch - and to help finance the transaction UBM provided Electra Partners with a £40m high-interest loan, which for some implied the FTSE 250 company was desperate to get rid of Delta.
Having said that, there are those who saw the sale as the disposal of a deteriorating, lower-margin business that generated a large amount of its revenues from Europe, which in turn is still trying to solve its sovereign debt crisis. Fine, but then why did the company purchase £30m buying 50% of Canada Newswire in November? Was UBM not supposed to now concentrate on its [cyclical] events division? The company's full-year results on March 1st should provide greater clarity. For now, Questor recommends steering clear of UBM. The shares are expensive, trading at a price-to-earnings ratio of 13.6, higher than some of its rivals, such as Informa. Avoid, it says.
Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.