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Tony Davis's avatar

Housing demand is not going away and interest rates will start to fall at some point. Most housebuilders are trading around book value and paying a good dividend. Apart from MJ Gleeson, most are putting out inline trading statements. I plan to sit on my hands with TW. Might even pick up a few in GLE

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Hoenir's avatar

https://moneyweek.com/personal-finance/pensions/pensions-adequacy-review-mansion-house

It's about reviewing pensions, so no definite change, and this might be well known already. The bit I think is relevant for UK businesses is that in the UK, an employee has to put at least 3% of an employee's earnings into the employee's pension, while Australia has just raised the rate to 12%. That's not to say the UK will get the same rate, or that any increase is definite, but it could be another cost for UK businesses.

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John Silvine's avatar

Don't forget again Paul, Weekend chat page pretty please.

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Small/Mid Caps with Paul Scott's avatar

I'd already forgotten LOL! Thanks for the reminder.

Right, I'll put the weekend chat page up now...

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Mr Andrew Bolton's avatar

AVAP Avation (LON:AVAP) I am not sure the maturing debt is a significant issue. The company has been paying back bond holders and it seems that they are confident of re-financing. NAV per share were £2.71 in the last full year accounts

Latest note from Zeus says AVAP trades at a 40% discount to NAV but with market values for aircraft trading at a premium the discount to market value is likely to be bigger than this would suggest.I think its highly likely to be a takeover target at this discount

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David's avatar

AVAP NAV was basically 295p at half way stage. It’s had share buy backs since then which will offset dollar declines and book value of planes undervalues NAV by 90p

So TNAV is closer to 400p. Its a 60% discount.

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Nyamen Sedap Lazat's avatar

Mpac investor presentation has seemingly gone down like a cup of cold sick- shares off another 4%.

Hard to understand how they are now shrinking despite blowing the cash on a transformative US acquisition last year. Where did it all go wrong?

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David's avatar

To be fair MPAC was off before the investor presentation started.

I think it’s pretty obvious that the US market is deferring orders because of Trumps tariffs and volatility of policy. This is causing US companies not to know how to allocate capital, so sensibly they are simply deferring those decisions.

MPAC will still look to be doing 33p EPS (the broker says “abundance of caution”) which is significantly profitable despite this pause in the US. Frankly if they hadn’t bought CSI and made a big geographic customer diversification the forecasts would have been much worse.

The shares are off on very small volume. It’s retail investors selling 1000 or 2000 shares and MMs are having fun - they now trade on 8* this years earnings. I’ll be looking to buy some if these levels persist on a 3 year view, though I’ll probably wait to see how Trumps 90 day tariff hiatus expiry plays out next week first.

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Nyamen Sedap Lazat's avatar

Yes I think that is all very sensible. They look cheap at this price to me, but I also thought that before the profit warning!

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David's avatar

In my personal view this is an unforeseen bump in the road caused very specifically by Trump and his tariff uncertainty. It doesn’t change the general trend of automation and MPAC are very good at what they do.

External circumstances can hit any company. Like with any profit warning what the investor has to discern is whether it is a short term bump in the road or company/market specific. The guidance from management is that all the projects that were in the pipeline are still in the hopper but they are delayed anywhere between 3-9 months as companies wait to see what the US landscape looks like once Trump has finished, but they are not cancelled.

As smaller investors we can jump in and out if we choose though I tend to take a longer term approach myself for various reasons.

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Andatza's avatar

Strange announcement from BTC -- maybe the punters already tiring of bitcoin treasury plays? The company raises £700,000 from retail punters instead of £1m after cutting back the number of shares applied for in the WRAP Retail Offer. Says the CEO: "Demand exceeded our target, but we chose to cap the raise strategically. We're here to build aggressively, but we intend to strike hard when timing allows for maximum impact." Go figure

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Simon Rowan's avatar

BTC. Full of expected contradicting BS. the CEO looks like a twelve year old character out of an Alex Rider novel. I dare say it’s legal but it’s also shameful. Nothing needs doing more urgently than improving the quality and reputation of the small cap market space with innovative economy building job creating companies. Reeves, you should be crying about this!

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Dave Loughran's avatar

Time to cry ?

Housebuildets and Brick companies etc - a look beneath the bonnet example

Think this is a very good example for investors to engage brains and look beneath the bonnet

There was a lot of chatter past few months about building boom etc and a bit of a lemming pile on to associated stocks

But look beneath rhe bonnet theres a squeeze in the market with both increased costs and reduced buyer demand and flat prices .

Plus the stone cold facts that the governments plans to build a gazillion houses are so ludicrous as to be laughable . Any investor takking that aa a green light of substance needs their head examined

Christopher Mills at Mello brought this all into focus and that was my moment of clarity / wake up call

I think its a possible falling tide not a rising tide and no mattee how good the company / CEO its incredibly hard to beat a falling tide .

Bull market maybe

Booming economy definitely not

Credible government with sound financial control - we should all be sobbing not just the chancellor .

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Pangit's avatar

I am bearish on house builders for a simple reason based on personal experience. I don’t believe that the house builders are fully provided for the costs associated with the cladding issue. I own a flat in a building affected by the cladding issue. We have had dozens of surveys since the issue arose and they have revealed significant issues with our building that go far beyond the original cladding issue. Since the cladding issue arose the developer has been uncooperative. This has led the leaseholders to initiate legal action. (Co-operation has improved since legislation changes and our legal action). From what we understand from our lawyers and experience of similar buildings in our locale our experience is far from unique.

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David Selmes's avatar

Dave, I agree with all of your points but I would emphasise that the slowdown is of the government’s own making – which they can fix. The Home Builders Federation report on 5th June 2025 highlighted that there was a 45% fall in the number of planning applications being approved in the first quarter compared to the last quarter. Adding the delays in approving the Building Safety aspects in multi storey buildings, increases in Stamp Duty and delays in public funding and we have a probable housing slowdown unless firms can mitigate these issues. However, so far it would appear to have impacted on Gleeson more than other firms – and, of course the government could probably fix these issues very quickly.

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Dave Loughran's avatar

Ps

45% fall in the number of planning applications being approved in the first quarter compared to the last quarter.

- i would suggest this may not be the full picture

There are also much lower number of planning applications going in !

Case in point i own a building in kelham island , voted by the guardian “the 17th trendiest place in the world”

My building is the last shithole warehouse in an urban redevelpment utopia .

I like it being a shit hole warehouse as thats how Sheffield was made, on steel not urban development of our industrial heritage

Anyway i digress

My partner who i own it with has developpped his other builldings he owns .

His last build was budget at 650k cost him double that as prices moved .

The building we own , probably worth 600k

We had a developper want to develop it and make 50 apartments

The finished value was 10 million

The build cost came to 9 million

Add on the 600k

He was making 400k

Now of course that Sheffield prices , in london and manchester sale price is pribably 30 million

So youll get even more polarised as london booms and the rest of us have to live in our council houses, walk our whippets and put ferrets down our trousers .

The streets of london are paved with gold

The streets of sheffield are paved with potholes and whippet turds

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David's avatar

It’s an interesting consideration on the North/South divide Dave

I don’t own much apart from Taylor Wimpey in the house builders largely as I like their dividend policy which is linked to book value, but from what I’ve noticed from recent trading updates is that house builders with a South and South East bias have basically said things are ok, whereas those focused further North are clearly struggling. So I think your analysis is pretty close to the mark - build costs are similar across the country but selling prices are so much higher in the South there is sufficient margin. That means almost irrespective of government policy house builders will focus on the South which will increase polarisation rather than level up.

Not sure I see MJ Gleeson performing well in that environment

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Hoenir's avatar

I'm not sure of my facts, so is this right?

1) Gleeson has a land bank, mostly in the South East

2) It's been performing well below expectations

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David's avatar
6dEdited

Gleeson is basically a North and Midlands builder of cheap housing and is performing badly. It does have some land bank across the country but it builds predominantly in the North which is where its profits come from.

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Dave Loughran's avatar

David

I dont believe they can fix it

There isnt the labour and skills available

There isnt the funding available to finance the builds

And there isnt the margin available as costs too high compared to sale prices

The government cant influence declining margins due to increased costs

And they cant influence selling prices

Honestly its a car crash investment case looming .

I couldnt be more negative and my point is any “noise” from government belies the fact housebuilders as an investment case

- have NO pricing power

- have increased costs all round

So margins down, shortage of skills so labour costs up, raw material prices up .

Looks a looming perfect storm to me .

Strong contrarian view most investors seem to think oppisite

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Jimbo Bones Jones's avatar

"But look beneath the bonnet theres a squeeze in the market with both increased costs and reduced buyer demand and flat prices."

Buyer demand is being suppressed by the relatively high mortgage rates currently offered which means people can't afford to buy their first property, take out a bigger mortgage etc. There's likely a lot of pent-up demand which will be realised when interest rates start reducing. Comments like this make it sound like we're all doomed and nothing will ever change. Feels like a buy signal to me!

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Dave's avatar

The Telegraph reported yesterday that Britains largest lenders warned the Chancellor that if ISA cash investments reduce the cost of funding will rise & lead to mortgages being more expensive & harder to access.

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Dave Loughran's avatar

But my view is in the minority

Its contrarian

The consinsus is “house builders are cheao and thetes a building boom on the way”

So thsts not the case at all ,

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Roger Adams's avatar

Paul and Team are building a great service - and value proposition……

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Karl's avatar
6dEdited

£100 per year 😮😮 That's not even 30p a day. Yes, I have said this before and no, I am not Paul's marketing manager.

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Roger's avatar

Isn't it now £120 pa to cover the VAT?

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Small/Mid Caps with Paul Scott's avatar

Hi Roger,

Yes I'll have to raise prices shortly, but purely to apply the required VAT, so I won't actually be charging any more myself. I want to keep it affordable/bargain, so we build a great community, and also the bigger the subscriber base, the more attractive we become to sponsors/advertisers, etc. Although I am VERY picky, and won't be accepting any trashy ads!

Regards, Paul.

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Karl's avatar

I don’t think it is just yet Roger, Paul has stated in his opening words this morning, £100 pa.

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Nyamen Sedap Lazat's avatar

AVAP: $125m cash.

MCAP £104m

Debt fallen consistently for 5 years.

It just looks too cheap.

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Small/Mid Caps with Paul Scott's avatar

AVAP has got hundreds of millions in debt!! So not valid to compare the gross cash with mkt cap, I would suggest.

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David's avatar
6dEdited

But with AVAP you have over $1bn of real assets that are strongly in demand. You should compare the TNAV which is around 400p versus 158p share price.

They have bought back 12% of shares and cancelled them as well plus buying their bonds back below par.

Edit: the only debt that really matters is the bond - 300m. The rest is asset backed by the planes - ie like a mortgage and it is tied to lease length so once the plane lease rolls off the plan is generally unencumbered.

The company has 125m of gross cash versus 300m of bonds. It can’t refinance those bonds before Oct 2025 (has to be within 1 year of maturity) but there are lots of options to do that. Worse case they sell 150m of unencumbered planes (tho highly unlikely in my view), more likely they issue some new notes hence the Moodys rating. Pricing of those notes is likely to be well inside the distressed price of the bond refinance back in Covid so will also have an effect of reducing finance costs.

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Wolf's avatar

They also got a B1 junk bond rating yesterday from Moodys

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The Oak Bloke's avatar

B1 is an improvement to their credit status which is a crucial - and positive - step to refinancing their debt later in 2025 (post October 2025 can refinance without penalty). Lots more aspects that will be covered in an OakBloke article next week.

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David's avatar

Agreed OB - I think the market has AVAP completely wrong. I don’t see any issue in the refinance of the bond and other debt is secured akin to a mortgage on the plane and tied to the lease terms matching interest rate risk profile. With increasing lease rates, hidden value in plane revaluations, significant share buy backs being strongly NAV accretive, debt reducing at c. $50m p/a and with new planes on order, for which there should be strong demand and margins, it seems downright bizarre for AVAP to trade at what is essentially a 60%discount to the real TNAV. Whereas competitors are at a 10% discount. That would suggest that even before any growth there is scope for a re-rating towards 350p.

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Nyamen Sedap Lazat's avatar

Today’s update has outstanding notes at just $310m.

Meanwhile the balance sheet is stacked up with fully rented out planes held at below current market valuation. It’s a bit like a car hire company, big debt, but a fleet of saleable cars to show for it.

I like it!

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Eric's avatar
6dEdited

With the reduced level of listed companies in the UK, it's another traditionally boring Friday tape. I see the hostile MBO bid for Empresaria (EMR) creeps closer with the (potentially) acquiring party creeping over 60% in supporting backers for the potential bid

Eric

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Rebecca aka AstonGirl's avatar

GLE MJ Gleeson After early June’s shock Profit Warning it’s all change at MG Gleeson

CEO Mark Knight exits right (& isn’t thanked I see)

Divisions are reorganised

They’re now inline with their revised guidance & get a bonus point for telling us what these expectations actually are

Expects FY26 to be similar to FY25

Slow and steady then- does this mark the bottom I wonder?

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Simon Rowan's avatar

‘Mortgage applications set to soften over the summer’ combined with new stamp duty rates now in place, the grotesquely slothian planning department, and possible autumn tax rises, not a great cocktail for property market revival. Our trendy little air B&b seaside town is awash with homes that have been on the market for up to 2 years. Estates all around built on concrete farms wilting like unharvested abandoned crops. The obvious conclusion is that property is still insanely overpriced, despite some easing.

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Rodney Townson's avatar

Markets are about confidence, not simply statistics. For the first 15 years this century, buy to let investors helped drive the market up while boosting the supply of homes and even helped some developers from going bust, while the banks withdrew support following the GFC.

Their reward? George Osborne thanked them for improving the standard of homes for rent by cutting allowances and taxing them on turnover by removing the ability to include interest as a deductible expense. He doubled down to introduce the second dwelling stamp duty surcharge. These measures achieved the desired (popularist) barrier to investment in the residential sector, leaving build to rent investors and social housing providers to pick up the slack.

The most recent report from HMRC show how little tax this raises:

https://www.gov.uk/government/statistics/uk-stamp-tax-statistics/uk-stamp-tax-statistics-2023-to-2024-commentary

"there were 191,500 transactions that were liable to pay the higher rates on additional dwellings (HRAD), which was 49,300 (20%) lower than in 2022 to 2023. HRAD receipts were £4,565 million in 2023 to 2024 which is £1,160 million (20%) lower than in financial year 2022 to 2023"

This tax impacts home movers and those looking to downsize if they have not sold their existing home, as HRAD must be paid and then reclaimed when the original home is sold.

In the last budget this tax rose from 3% to 5% and all stamp duty holidays have now ended, along with Help to Buy, together with the change of tax treatment for non-doms and other HNW individuals will be as likely to see the receipts fall again, rather than rise.

As I said at the beginning, markets are about confidence (as seen following PMQs this week). Removing this barrier to investment will not help first time buyers or cause the Bank of Mum and Dad to close its doors, but investors be more willing to invest if this barrier was removed, driving up demand and reducing friction in the second hand market. This in turn feeds through to higher demand for decorating, furnishing and other supplies and services.

Obviously, the kick start the market is hoping for over the summer is for the BoE to cut the base rate.

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Simon Rowan's avatar

The housing market is all about interest rates. Both my sons have around 200 k mortgages. The monthly payments are the same as my mortgage for 65k in the eighties. That’s why house prices are where they are now because of zero interest rates. A friend of mine purchased a yacht with a loan and got £50 a month back when interest rates went negative! As well as chartering it out. This is one of the problems with Property driven economies.

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Langham Lad's avatar

Bloomberg’s In The City podcast is not very upbeat on the housing mkt. And positively doom laden on the higher end of the curve. Worth a 20min listen…

htTPs://youtu.be/eQZh40UxpYw?si=ewZff6bOHHrJEJ6b

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Alun Morris's avatar

Mark Knight was CEO of subsidiary Gleeson Homes.

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Paul F's avatar

Muscular trading statement out of Gleeson today. Worth reading in detail. Harwood involved?

I read this as a mild profit warning, followed by a stern reaction to it. I note that all housebuilders have dipped. I think this is because of margin pressure, which I have noted before, plus subdued demand due to high interest rates. Finally, no one seems to want bigger land banks, because of the balance sheet pressure.

I've seen all this before. In fact it was exactly this pressure which I think led to the long run of success at Berkeley Group - a Chief Executive who saw this as a market bottom.

My Michelmersh Brick shares have dipped recently. It's all tied in.

Ironically this is getting close to buying time for me. I hold MBH and TW. already.

Time for interest rates to come down. If we were in the Eurozone our whole economy would be in far better shape. Brexit has a lot to answer for. Yes, I know that we never were in the Eurozone....

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Paul F's avatar

I have added a modest stake in Gleeson this morning. I think that the shares are now good value, albeit with a miserly dividend which I don't like....

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The Jayman's avatar

although so far only down circa 7%

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