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Taylor Wimpey Plc, an FTSE 100 stock, has suffered severely during the Corona crash. The company’s stock at a price of GBX 108.5, as on 30 September 2020, has lost almost 45 percent since the beginning of the year.
If we have a closer look at the share price movement there isn’t much to impress, as the stock price has been on a downhill journey for the last couple of months.
However, the housing market pick-up is building momentum around fundamentally strong housebuilding stocks like Taylor Wimpey.
The mini-boom recently witnessed in the housing market and the surging home prices further validate the idea. September 2020 has been marked as a month with the fastest annual growth rate in housing prices in the UK, since the Brexit referendum of 2016.
The pent-up demand has been strongly supported by the government’s stamp duty scheme, resulting in a sudden spurt in the number of units sold.
And we think this momentum can further continue given the national housing shortage and the increase in demand.
The Government aims to build 300,000 new homes every year to meet the ever-increasing demand and still despite all efforts is unable to meet the target. Last year’s performance, even though the highest in a decade, was 17 percent lower than the targeted 300,000 marks.
This is where Taylor Wimpey comes into play, who is a national player with a local presence, providing property options across England, Scotland and wales through their 24 regional offices. The company’s performance has been relatively resilient in the first half despite the challenging time. Though the revenue halved and it also suffered an operating loss of over £ 16 million, but it still performed better than many other companies operating in the same space.
The silver lining is the positive sales momentum and a strong order book of the company. As of 26 July 2020, the Taylor Wimpey was around 97 percent forward sold for its private completions for 2020, and now is focusing on building the order book for 2021.
Though the company reported an increase in total debt to £104.5million, from£89.3million a year ago, it still has more cash in hand then debt in the books, and the balance sheet looks much stronger than many other home builders in the UK.
It is expected that the company will end the year with net cash of £550 million to £750 million. However, everything is not rosy and there are some legal challenges, which one should also take into consideration. The Competition & Markets Authority (CMA) has recently initiated an enforcement case against many leading home developers in connection with the sale of leasehold homes, and potential breaches of consumer protection laws and Taylor Wimpey is one of them.
