Budget housebuilder MJ Gleeson (GLE) could interest investors looking for exposure to the sector but nervous about an overheated property market.

The dividend was hiked 44% at the half-year stage to 6.5p as increased cash flow helps bolster the balance sheet and the company signaled its confidence in demand (27 Feb). A prospective yield of more than 3.5% looks increasingly attractive.

The company trades at a premium to its larger peers on a price to book ratio of more than 1.8 times, based on Liberum forecasts, but this is justified by the greater growth potential in its niche of building low-cost homes on brownfield sites in the North of England. The average selling price of its homes is just £125,000.

Focus on genuinely affordable homes

Although around two thirds of completions in the six month period benefited from the Government’s Help to Buy scheme, chief executive Jolyon Harrison tells Shares the affordability of the company’s homes means its buyers are not reliant on this giveaway.

Management sees scope for growth as Gleeson expands into areas such as Cumbria and West Yorkshire and it recently opened a new branch office in Nottingham.

In the background its strategic land business is humming away, delivering a steady stream of profit as land, concentrated in the South of England, is progressed through the planning system.

Gleeson has an attractive business model. Buy its shares at 589p. (TS)

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