One Housebuilding Stock Under Investors’ Lens:  Crest Nicholson Holdings PLC

Crest Nicholson Holdings PLC

Crest Nicholson Holdings PLC (LON: CRST) is an FTSE 250 listed residential housebuilder, domiciled in England and Wales.

The Group anticipates announcing its half-year results for the six months ending 30 April 2022 on 14 June 2022.

Investment Rationale for Valuation – SPECULATIVE Buy at GBX 270.00

• Trading Update: On 22 March 2022, the Group has provided a trading update for the period 1 November 2021 to 21 March 2022 and has reported decent performance and continues to see decent demand for its homes.
• Strong Order Book: The order book as of 18 March 2022 remains strong with over 84% revenue covered for FY22, and an increase from 63% reported during preliminary results in January.
• Turnaround in Profitability: The company delivered a turnaround in profitability in FY21 with profit after tax at £70.9 million, compared to a loss of £10.7 million in FY20.
• Technical Indicator: The price of the stock is trading between the lower and middle Bollinger band with 14-day low RSI level of ~39.51.

Key Risks

• Macro Risk: The outbreak of the war in Ukraine and continuing impacts of the pandemic continue to put pressure on the equity markets and the gambling industry in the near term.
• Inflation Concerns: The global political instability and COVID concerns have disrupted the supply chain and made energy prices to soar up in the near term.

Financial Highlights (for the year ended 31 October 2021, as of 19 January 2022)

(Source: Company Website)

• Rise in Revenues: The Group reported total revenue of £786.6 million in FY21, reflecting an increase of ~16% from FY20 levels.
• Cash Position: Net cash during FY21 end stood at £252.8 million, a significant increase from £142.2 million in the prior period end.

One Year Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22E)

Conclusion

The management has updated that its expansion plans are progressing well and has appointed a new leader for its new Yorkshire division.

The stock made a 52-week high and low of GBX 469.00 and GBX 247.00, respectively.

Based on the decent performance, turnaround in bottom line, decent order book, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Crest Nicholson Holdings PLC at the current market price of GBX 270.00 (as of 01 April 2022, at 09:21 AM GMT +1) with lower double-digit upside potential based on 8.07x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

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