Taylor Wimpey PLC

Taylor Wimpey PLC is an FTSE 100 listed residential property developer who builds a wide range of properties in different price ranges. It produces both private and affordable homes.

TW. had paid an interim dividend of 4.14 pence per share on 12 November 2021, while the ex-dividend date was 07 October 2021.

The Company will release its full-year FY21 results on 03 March 2022.

Investment Rationale for Valuation – Buy at GBX 153.35

• Strong Order Book: FY22 started excellently with a strong order book and 47% forward sold for 2022 (2021: 54%).
• Robust Demand outlook: Despite broader economic volatility, future indicators indicate good underlying demand for homes, and the pricing remains positive.
• Solid Outlet Flow: Subject to planning, the company remained well-positioned to meaningfully augment outlets from H2FY22 to underpin a phenomenal step up in volume from 2023, as earlier projected.
• Focus on Core Value Drivers: With a solid focus on optimizing sales prices, cost, process generalization and other critical core value drivers, the company is confident of achieving a 21-22% operating margin.
• Technical Indicator: The stock price is hovering between the lower Bollinger band and the middle Bollinger band, indicating an upside potential in the stock price.

Key Risks

• Interest rates and mortgage availability governs housing affordability and accessibility. The interest rate environment determines mortgage availability and housing demand.
• The future home's standard describes new regulations and policies to make new homes more energy-efficient. Part L refers to protecting fuel and power, and Part F covers ventilation

Recent Developments

• Voting Rights and Capital: On 1 February 2022, the company announced that it issued share capital consisted of 3,648,793,991 ordinary shares of 1 pence each.
• Changes in Board Committee: On 31 January 2022, the company stated that Angela Knight and Gwyn Burr would be retiring from the Board of Directors on 26 April 2022.

Trading Update (for the year ended 31 December 2021, as on 17 January 2022)

• Total UK home completions (including JVs) grew by 47% YoY to 14,087, comprising 2,501 affordable homes, equivalent to 18% of total completions.
• The net private reservation rate for FY21 stood at 0.91 homes per outlet per week.
• The cancellation rates stood at 14% in FY21 versus 20% in FY20
• The average selling prices on private completions grew by 3% YoY to £332k in FY21 versus £323k in FY20, with the overall average selling price rising to £300k in FY21

One Year Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22) (Illustrative)

* Peers: Countryside Properties PLC, Persimmon PLC, Redrow PLC, and Springfield Properties PLC.

* All four peers are selected from the Household Goods & Home Construction sector as classified on the LSE website. 

Conclusion

The company reported robust performance in FY21 and anticipates reporting full year results in line with the forecasted numbers. Despite flips in the market conditions, the company continues to realise strong demand for homes. The strategic decision made for sales rates, prices and operational optimization and efficiencies resulted in significant betterment in operating margin. The landbuying strategy during COVID-19 circumstances supported in accelerated land investments, provided a sector-leading landbank that would support future growth. The outlook is positive, and the company is well placed to deliver sustainable growth, strong profitability, and increased cash returns over the long term. The stock made a 52-week low and high of GBX 143.15 and GBX 193.80, respectively.

Considering the factors above, we give a “Buy” recommendation on the stock at the current market price of GBX 153.35 per share (as of 3 February 2022 at 10:02 AM GMT).

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. 

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.

Disclaimer

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

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.

Kalkine Media Limited, an affiliate of Kalkine Limited, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.