Gleeson set out its 3,000 home target at its Jul. ’23 CMD. This compares to 1,772 homes delivered in FY24 and an FY22 peak of 2,000, having doubled the size of the business over five years from 1,013 in FY17. In this note, we put some meat on the bones of how the target will be achieved. A significant, 100 site pipeline (vs. current sales sites of 62) and an improving backdrop give us confidence in Gleeson’s ability to achieve its target. Our base case shows the target being achieved in FY30 at the latest whilst taking a cautious view over the pace of recovery in FY25/FY26. Our analysis shows a return to consistent earnings growth in a more stable market, with a PBT CAGR of 25% (FY24-30). This alone should drive a higher share price but we believe Gleeson is likely to regain its historic valuation premium as growth becomes more visible. We remain long term supporters of the Gleeson story and retain our Buy rec.

MJ Gleeson PLC

• 27 Aug 24
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FSFL delivered a solid Q2 NAV (114.9p +0.2p) and we are constructive for the remainder of 2024 and beyond. In FSFL’s interims (due mid-September) we expect an update regarding fund’s asset disposal programme, capital allocation strategy and investment pipeline. In our opinion, progress on asset disposals (and the associated reduction in the fund’s RCF) will be a key element in driving the fund’s re-rating. We remind investors that FSFL is a deeply discounted, interest-rate sensitive, investment. Our expectation is that as the market builds confidence that the power price forecast volatility has subsided, investors will re-focus on the differential between the fund’s discount rate (c8.0%) and gilt yields (largely sub 4%). Given this environment and the likely trajectory of interest rates, we view the fund’s c26% discount to NAV and c9.5% yield as highly attractive.

Foresight Solar Fund Limited GBP

• 08 Aug 24
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The war-chest deployed on some attractive M&A When we last wrote, we highlighted that NET’s £34m net cash could be used on M&A to augment its proven organic growth engine (we forecast 11% y/y organic revenue growth for FY25). Today’s acquisition is exactly that, adding £3.4m ARR, increasing the UK council customer base by 31% and adding an automation product that presents cross-sell opportunities and makes NETs offer that much stickier. The incoming management team are well incentivised by a two-year earnout (and a further year of lockup) if they can achieve a £5.2m ACV, which of course, would benefit NET from materially higher earnings, offsetting the added cost. The initial consideration is at a modest price of 2.4x FY24 ARR, if the earnout is achieved this reaches 2.5x ARR. All in all, a good use of cash that makes NET a better proposition.

Netcall plc

• 07 Aug 24
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Sanderson’s H1 trading update indicates that trading is in line with the revised expectations set out in late June. We make three key points: 1) July trading at the dominant Brand products division was much more positive; 2) The balance sheet is in a healthy net cash position; and 3) Investment, cost savings and strategic progress in the business should leave it well positioned when the macro environment improves. On our unchanged forecasts the shares trade on an undemanding P/E of 10x, 4.6x EV/EBITDA and yield >4%. We stay at Buy with a 120p TP.

Sanderson Design Group PLC

• 07 Aug 24
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TPFG’s trading update highlights a strong H1 outturn despite a challenging market backdrop. LFL revenue increased by 3%, including LFL MSF (franchise royalties) growth of 8%. Total revenue including the Belvoir and GPEA acquisitions grew by 104%. The full year outlook is supported by continued resilience in Lettings and 16% LFL growth (67% inc. acquisitions) in the sales agreed pipeline. Management therefore remains confident that trading remains at least in line with market expectations for FY24. Recent deals have enhanced TPFG’s scale and leave it well placed to continue its strong track record of earnings growth over the medium term (PBT CAGR of 23.5%). The beginning of interest rate reductions is also supportive. We continue to target a 15x P/E multiple to drive our 532p target price and remain at Buy.

Property Franchise Group PLC

• 07 Aug 24
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Hargreaves’ FY24 results confirm an adj. PBT outturn which is in line with expectations at £16.9m (SCMe: £16.6m). It experienced strong performances in Services and Land, with reduced profitability, as well as a significantly increased cash receipt, from HRMS, all as anticipated. With a high level of secured Services revenue (70%), strong opportunities in Land and signs of recovery at HRMS, the outlook is confident. Against this, we continue to see significant value in the shares. The investment case is clear - as Hargreaves transitions to a capital-light and profitable Services and Land Development business, we expect a number of value realisation events, with potential to return up to £150m of capital vs. a market cap of £189m. We reflect one of these events in our FY27 forecasts. Investors are paid to wait for value to be realised, with a sustainable dividend yield of 6.3%. The shares trade broadly in line with NAV of 583p and significantly below our conservative sum of the parts valuation of 757p. Buy.

Hargreaves Services plc

• 06 Aug 24
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