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Company delivers better than expected numbers for March 2018 financial year

Telford Homes (TEF:AIM) 466p

Gain to date: 14.1%

Original entry point: Buy at 408.5p, 14 December 2017

nvestors used full year results from London-based housebuilder Telford Homes (TEF:AIM) as an opportunity for some modest profit taking. However, the stock still trades materially higher than the level at which we flagged it in
December 2017.

In the year to 31 March 2018 Telford posted a 35% increase in pre-tax profit to £46m, against a forecast £45m, and said it could beat the £50m profit target for the current financial year. This would add up to a doubling of pre-tax profit over a four-year period.

The company, which focuses on ‘non-prime’ or in other words less expensive parts of the capital’s housing market, says it is benefiting from an ‘under supply’ of new homes in London and demand for more affordable homes, particularly for renting.

It expects to take advantage of this demand by focusing on the build-to-rent sector across London.

Because these projects are often pre-funded by institutional investors this enables the company to grow without taking excessive risk or needing additional equity capital.

Canaccord Genuity analyst Aynsley Lammin says Telford’s valuation is ‘less compelling’ after its recent share price run, but it is still well supported with improved visibility on profits and growth.


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