Henry Boot PLC

Established 135 years ago, Henry Boot PLC (LON: BOOT) is engaged in construction, development, property investment, and land promotion.

On 13 September 2021, BOOT is due to release to its H1 FY21 results.

Investment Rationale – SPECULATIVE BUY at GBX 268.00

• As housebuilders are accelerating the pace of land acquisitions, demand for strategic land remained solid.
• The activity level in the Banner Plant is returning to pre-Covid-19 levels and has surpassed the FY21 budget.
• Henry Boot delivered a decent start to FY21 with better-than-expected forward sales and order book with strong housebuilding and development.
• From a technical standpoint, Bollinger Bands suggests that the price is hovering close to the lower standard deviation, while the 14-day RSI (~42.30) is also near the oversold position.
• In terms of valuation metrics - EV/Sales, Price/Book and Price/Earnings multiples are lesser than the industry median.

Risk Assessments

• The recessionary economic conditions can impact consumer confidence and demand in the short term.
• The disruption to the supply chain can increase material costs. The changing patterns of consumer demand pose a risk to future developments as well.

Recent News

Land Sale: On 8 June 2021, Hallam Land Management (land promotion business of BOOT) sold 116 plots to Barratt Developments for £2.6 million.

AGM Trading Update (as on 20 May 2021)

• Henry Boot affirmed that it is trading in line with the Board’s expectations as it continued to witness a market recovery.
• On a YTD basis, the total Gross Development Value stood at £29.0 million, following the nine strategic land sales.
• The Company maintained a strong balance sheet with net debt of £4.0 million.
• Its investment portfolio has surged to £91.8 million (as of May 2021), following the acquisition of two industrial estates (City Court, Manchester for £5.8 million and Allied Business Centre, Skelmersdale for £4.7 million).

Share Price Chart

 (Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY21) (Illustrative) 

Conclusion

Henry Boot has witnessed growing signs of recovery and it is encouraged by the current performance.  Moreover, the Company has a substantial financial position to focus on three long-term trends – residential development, urban development, and industrial & logistics. Adjacently, Henry Boot Construction is trading ahead of expectations with a robust order book. Meanwhile, Stonebridge Homes has already achieved 66% of FY21 delivery targets. Overall, it is on track to meet its medium-term targets. The stock made a 52-week High and Low of GBX 290.00 and GBX 230.00, respectively. On the technical chart, the next important support level is at GBX 221.40.

Based on the strong trading momentum, recent acquisitions, robust balance sheet, with supported by the valuation conducted above, we have given a “SPECULATIVE BUY” recommendation on Henry Boot PLC at the current market price of GBX 268.00 (as on 15 June 2021, at 2.10 PM GMT), with lower double-digit upside potential based on 21.07x Price/NTM Earnings (approx.) on FY21E Earnings Per Share (approx.).

*All forecasted figures and Industry Information have been taken from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

*The reference data in this report has been partly sourced from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level (indicative stop-loss price).

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

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