Telford Homes - impressive trading update

Because of the reasons given here it is difficult not to be bullish about UK house building stocks and if further proof were needed it came in a trading update from Telford Homes today. Reading through the high points it is difficult to believe that the UK housing market, at least in terms of sales, is going through a bit of a slump, but Telford is London biased. Many housebuilders seem to be reporting good business, something which can only be increased by further Government intervention.

The company reported.

Exceptional levels of demand with contracts exchanged for the sale of 803 open market properties in the year to 31 March 2013 (2012: 460) Strong demand from overseas investors for London property; however over 60 per cent of the exchanges in the year were sold to UK buyers Already 94 per cent pre-sold for the year to 31 March 2014 and over 50 per cent pre-sold for each of the two following years

Significant improvement in both gross and operating margins

Profit before tax for the year to 31 March 2013 will be ahead of market expectations

Net debt reduced significantly to under £35 million (2012: £54.6 million)

 The outlook presented today is about as positive as you could want it.

Outlook

The London property market remains encouraging and the Group's forward sales position, increasing margins, healthy development pipeline and enhanced financial strength are all reasons to look forward to the next few years.

The Board is confident that substantial growth in profit levels can be achieved over the next three years from the existing pipeline and has a long term strategy to further this growth, in London, over the next five to ten years.

http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=11554068

The dividend yield on this one is pretty low and the P/E looks stretched, but you pay for quality like this. Momentum in the share price is also up so things look stretched here as well, but as can be seen on the weekly chart below, a new breakout appears under way.


I suspect many will look at this chart and think all the good news is in the price, but companies which consistently produce results like the above have a habit of just going higher and it takes a certain trader type mentality to buy into momentum like this which isn't for everyone. Sometimes buying at higher highs just pays off and waiting for pullbacks that never come means the boat is missed. Of course, the chances are that there will be pullbacks, but they tend to be small. Looking at the chart below there haven't been that many in the last 2 years.

There should be more to come if the 3 year projection from the company as given in their trading update above works out.

Telford Homes - Weekly