Bellway & Anglo Pacific Group

Bellway (BWY) the UK national house builder has announced final results to 31st July 2014 today. As expected given their recent updates and news flow on the sector they reported some very strong numbers which you can read in detail at the link above. The earnings and dividends both came in slightly ahead of forecasts by about 4 to 5%. Other highlights were:

• NAV of 1118 pence for a price to book of 1.4
• Operating margin increased 3.6% to 17.2%
• ROCE up from 12.3% to 19.6%
• Land bank of 35,434 plots versus houses built this year of 6,851
• Net cash of £5.1 million
  

However, they were fairly cautious, as usual, about the outlook projecting just a 10% increase in volumes despite a record order book. This suggests limited room for upgrades to earnings at this stage as forecast already assume turnover rising to that extent or more, unless the reported margins today are higher than analysts had in their forecasts or if they expect further price mix benefits next year.

The shares have responded positively this morning and I continue to like them as they still look good value on around 8x P/E with a 4%+ yield which is 3x covered, expected to grow strongly and is backed up by a strong balance sheet, a conservative management and a decent industry background.

Meanwhile one of my readers (thanks Arthur) pointed out in a comment on a previous post that Anglo Pacific Group (APF) had made it onto a near 10% yield. Well today they have made an announcement about their important Kestrel royalty agreement with Rio Tinto. The bottom line on this is that it improves their cash flow and they also stated:

"We are pleased to see an increase in forecast production from our royalty lands at Kestrel.  This is positive news for our cash flow profile and further underpins the Board's commitment to maintain our dividend for the current year."

So it might be interesting as a contrarian play on mining assets / prices, trading as it does at a discount to book value, with cash on the balance sheet and a new well regarded management team plus a near 10% yield. I guess though there is some question mark about the sustainability of this going forward, but maybe therein lies the opportunity? But be aware the NAV and revenues here are certainly not set in stone, but in their recent interims when they maintained the interim dividend the company did set out a reasonably positive outlook as follows:

"We remain confident in the long-term demand fundamentals for base metals and bulk commodities, which should positively impact on Anglo Pacific's royalty portfolio. We continue to be confident in our ability to acquire additional royalties that will generate strong and sustainable cash flows and allow us not only to improve our dividend cover, but also to increase our dividends per share in the longer-term.

In the short term, the outlook for the remainder of 2014 remains subdued and the Group expects lower adjusted earnings until production from Kestrel returns to our private royalty lands in the second half of 2015. The current price environment in our targeted commodities, coupled with limited financing avenues for operators in this sector, presents opportunities for the Group to grow our royalty portfolio. Your Group remains debt free and, along with a committed dividend policy, remains a lower risk, mining focused investment for investors who believe in long-term global GDP growth."

Stock is up 12% this morning on the back of the announcement so may not be the best day to buy it but might be one to put on your watch list and pick up if it drifts off again especially as they do not go XD the interim of 4.45 pence until 27th November 2014.