House prices are almost as British as fish & chips. Hardly surprising really, given in total residential property is worth a staggering £7.1 trillion (source: Savills), or >4x GDP. So what’s the latest word on the street? Well despite being buffeted in Q1’18 by the country’s other favourite topic, the weather – the recent outlook from the nation’s housebuilders appears to be positive. The UK construction industry rebounded 2.9% in May, led by ‘new build homes’ which were up 8.4% on LFL terms.
Going forward, we expect activity levels to remain supportive - albeit slightly less so in central London, which has greater BREXIT exposure and much higher property values. This positive outlook underpins our forecasts for specialist plant hire group Vp, who released an upbeat trading statement this morning ahead of its AGM.
Here, the company has enjoyed an encouraging 1st four months, with its core UK infrastructure, housebuilding & construction markets demonstrating solid demand. The integration of Brandon Hire is also progressing to plan.
Elsewhere, there has been a “modest recovery” in the overseas oil & gas business (Airpac Bukom) reflecting improved crude prices, allied to good trading at the AsiaPac test & measurement operation.
Consequently, we make no change to our numbers, but nudge up the valuation to £11.00/share from £10.70 - based on a 12x EV/EBIT multiple, which is consistent with sector EV/EBITDA averages of 6.4x.
