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The lettings and estate agent has delivered 24 years of unbroken profit growth
Thursday 10 Jun 2021 Author: Tom Sieber

Investors are not too late to benefit from a rising share price in estate and letting agent Belvoir (BLV). The company’s attractions are finally being recognised by the market after years of largely being ignored.

The valuation remains undemanding against a positive backdrop, with the housing market continuing to surge and demand for rental properties extremely robust. This makes it an excellent time to buy.

Based on 2022 forecasts from FinnCap, the shares trade on a price to earnings multiple of 11.9 as well as offering a free cash flow yield of 8.6% and a dividend yield of 3.3%.

Belvoir provides support and guidance to its franchisees across 300 high street offices in return for a management service fee. Its franchise model means it has relatively limited costs and obstacles to expansion and is highly cash generative.

The company also has a solid balance sheet with net debt of just £3.7 million as of 31 December 2020.

Founded more than two decades ago, Belvoir joined AIM in 2012 and despite the pandemic, has achieved 24 years of uninterrupted profit growth.

This earnings progression has been supported by acquisitions both at a group level and so-called assisted acquisitions where it helps local franchisees to identify and make bolt-on additions to their local operations.

Belvoir has built-in diversification thanks to its substantial lettings business, income from which is generally more stable than property sales and is typically recurring. This provides some protection against any downturn in the property market.

The company is also expanding into ancillary financial services like savings and mortgages. On 2 June the company exchanged contracts on a £600,000 deal to buy The Nottingham Building Society’s mortgage services business.

Belvoir has an existing partnership with The Nottingham and FinnCap analyst Guy Hewett notes the lender has 50,000 Lifetime ISA savers (expected to reach 100,000 within a few years) which are likely to need their first mortgage in the future once they’ve amassed enough in the tax-efficient savings vehicle to get on the housing ladder.

He notes that over the medium term this could drive a significant increase in the 12,000 mortgages Belvoir arranged in 2020.

Hewett adds: ‘Belvoir has a range of growth opportunities in a changing, large and fragmented market and has the model and proven management skill to continue to take advantage of them.’ 

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