This stock has served us well, but it's time to bank profits and move on
However, the housebuilder's shares now trade at slightly above historic net asset value (Nav) per share, which makes it feel as if the easy money is already in the bag, meaning it is time to bank profits and move on from the FTSE 250 firm.
Bellway's completions and average selling prices for the year to July both look set to slightly exceed expectations, while an increase in reservation rates and the forward order book provides management with greater visibility for the next financial year, to July 2026.
Chief executive, Jason Honeyman, and his team now expect a cumulative 20pc increase in completions across 2025 and 2026. Management is also hinting at share buybacks when the company completes a review of its capital allocation policies later this year. As a result, analysts are gently nudging up profit expectations for this year and next.
Investors who feel that an upturn in demand is coming – and that planning deregulation will ease cost burdens – may feel this represents an opportunity. Others will fret about affordability, weak consumer confidence and how sticky inflation could crimp the rate at which interest rates, and thus mortgage rates, decline.
What is clear for the moment, at least, is that analysts' forecasts for Bellway's housing completions still leave the forecast total for the year to July 2026 below the equivalent figure for the twelve months to July 2017.
Higher house prices have therefore done much of the heavy lifting so far as sales and profits are concerned, and it hard to see why profits and margins will rapidly return to the levels seen during the go-go times of the late 2010s, when the Bank of England base rate was almost zero and Help-to-Buy was in full swing.
We do not have a crystal ball and thus do not know what is coming next. Nor are we keen to rely blindly upon government policy given the scope for delay, error, or, at some stage, a change of administration and thus change of said policy.
Our ultimate guide must therefore be valuation. Covid, higher interest rates, rising input costs, the end of Help to Buy in 2023 and regulatory levies have all weighed on Bellway and the housebuilders more generally, with the result that stocks have derated. Whereas multiples of toward two times historic Nav prevailed, the sector now trades on barely one times.
We first looked at the Bellway in the immediate wake of the stock, bond and currency market gyrations that followed the Truss-Kwarteng mini-Budget of autumn 2022, when the housebuilder traded at a deep discount to Nav.
Our capital gain is now nearly 40pc, while dividends received represent 310p a share, or a sixth of our entry price. As such, it feels prudent to crystallise our paper gains, especially as we still have exposure to the industry through Crest Nicholson, MJ Gleeson and Springfield Properties.
These all still trade at a discount to historic Nav of at least 25pc, even if some would argue there are good reasons for them to do so, given their recent spotty operational and financial performance.
Questor says: sell
Ticker: BWY
Share price: £28.76
Update: Assura
Well, that did not take long. A fresh bid for Assura from KKR means we can continue to watch the takeover tussle for the healthcare real estate investment trust (Reit) develop, in the knowledge that some sort of deal looks assured.
Investors can start to do their research on what may be suitable, replacement portfolio picks, either within the Reit sector, where lowly valuations relative to Nav still prevail or elsewhere.
Private equity and investment giant KKR has upped its offer to 52.1p per share in cash and dividends for Assura, a slight premium to Assura's latest stated Nav of 50.4p.
Rival suitor, Primary Health Properties, a UK-listed healthcare specialist Reit, has tabled a cash-and-stock offer, which also includes dividends, and is now worth 53p a share thanks to a plan to pull forward an additional dividend due for payment in the autumn.
Assura has flip-flopped from recommending February's initial KKR offer, to doing due diligence on the PHP approach, and then returning to recommending KKR, a move which PHP has understandably contested.
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