Housing sector

Countryside Partnerships PLC’s offer highlights the value of the housing sector

The bid for Countryside Partnerships PLC (LSE:CSP) from a US fund highlights good deals in the housing sector, but the offer may not be successful, analysts said on Monday.

San Francisco-based Inclusive Capital Partners has turned hostile to a possible cash offer of 295p per share after saying the FTSE 250-listed company ‘would not commit’ after making private offers, or give access to its books for due diligence.

In-Cap, which said it owns 9.2% of CSP shares, said its offer price was a 31% premium to closing stock at the end of last week and 28, 5% from April 7 when Countryside released a strategy update.

The offering represents 1.3 times historical book value, or about 12 times forecast earnings for calendar year 2023 and about eight times the 2024 earnings reported at the time of the company’s forecast last year, a said broker Peel Hunt.

“Overall, we would be surprised to see the offer accepted at the current level, with many of the company’s major shareholders backing management’s turnaround strategy,” said Peel Hunt analyst Sam Cullen.

The offer reminded Russ Mold, chief investment officer at AJ Bell, of the former stock market saying “you can have good news and cheap stocks, but not both at the same time.”

“There has been some precious little good news at Countryside Partnerships for some time, but the fall in the share price to its lowest level in five years has attracted an offer from Inclusive Capital, to suggest they are thinking that there was a good deal to be had.”

He noted that the whole of the UK housing construction sector is trading at 1.2 times book value and just over eight times forward earnings, with balance sheets that show net cash in the l ‘together.

While it’s easy to argue that life “could be about to get a whole lot tougher for homebuilders,” says Mold, given the crisis in the cost of living, rising unemployment rates, Interest, rising surfacing costs and regulatory oversight, Countryside has set aside £81 million to cover the cost of resurfacing.

Prior to the offer, Countryside had a market capitalization of £1.2bn and, according to its first half accounts, £1.2bn of inventory and £0.2bn of cash on its balance sheet .

Mold cited the old rule of thumb that builder stocks represent potentially good value when trading at NAV or less, but expensive when trading at twice or more.

“Countryside was trading down that range, and several builders of the FTSE 100 and FTSE 250 still do.

“Even Inclusive Capital’s 295p per share offer does not put Countryside shares at the top of that 1.0x to 2.0x range for historical net asset value, so a counter-offer, or at the unless a higher bid to complete the deal, cannot be ruled out altogether.”

Home builder P/NAV (history) p/e (2022 is EPS) Yield div (2022 est) div cover
Nicholson Ridge 0.81x 6.3x 6.5% 2.47x
vistry 0.85 times 6.4x 8.7% 1.80x
Bell 0.92x 5.8x 6.1% 2.81x
red row 0.99x 5.8x 5.8% 3.00x
Barratt Developments 1.01x 6.5x 8.8% 1.76x
Taylor Wimpey 1.12x 6.6x 9.1% 1.67x
Berkeley Homes 1.64x 10.9 times 5.5% 1.68x
Rural partnerships 1.66x 9.5x n / A n / A
Khaki 1.99x 9.3x 10.7% 1.00x


8.4x 7.8% 1.71x