Initiation:…….in land we trust

‘In God we trust’ is the official motto of the United States of America, second only perhaps to real estate (in a politically correct World). This latter dictum derives from the belief that they are not making any more land - the industry’s core raw material. Inland Homes, however, makes its own by being adept and nimble in finding sites and bringing them through planning. It is a hidden gem.

• Strategy: The Company is a UK brownfield regeneration specialist which means it finds land, achieves planning permission and sells it ‘oven ready’ to housebuilders and mixed use developers (and it can also be master developer in its own right). Inland’s gathering emergence, too, is timely given that the majority of listed UK housebuilders are humming the ‘capital light’ mantra.
• Ethos and track record: Its current portfolio consists of 6,936 plots with the vast majority in the south and south east of England. In addition, strategic land has the potential for some 2,270 residential plots across 408 acres typically on a two to five year time horizon. Plus, Inland is building 427 houses in its own right.
• Valuation: Due to the nature of its business, the Company employs EPRA net asset value as its prime metric i.e. this reflects the unrealised value in its land. Right now, though, Inland is trading on a 39% discount to that value whereas its nearest equivalents Urban & Civic and St Modwen are at 9 and 19% respectively.
• Risks: The UK economy is a little like a tardy Goldilocks: not too hot; but perhaps the wrong side of lukewarm. However, even the most pessimistic forecasts are at 1% or better for GDP growth per annum in 2017 through 2019. Similarly, the 25 basis point rise in interest rates on 2 November was already built in to our shared prognostications. Note, too, that the UK Housebuilding Sector dipped just 0.24% on the interest rate news and remains 43% ahead in the year to date.
• Investment summary: The Company is complicated, unconventional and moves to a different metric beat than a regular housebuilder; it is not one of these, but it can be when it wants to be. The real alchemy, though, comes in finding land and bringing it through planning. Here, it reaps handsome rewards and the share price will notice; it is simply a matter of time. Inland we trust.