Quintain Estates: 2006 results

9:20 a.m. Fri 02 Jun 2006

Quintain Estates reported that net asset value (NAV) per share increased by 19% to 526p in the year to March 2006.

The company’s pre-tax profits rose by 86% (to £65m from £34.9m last year) mainly due to sales in the core investment portfolio and substantial valuation uplifts. Disposals realised profits in excess of valuations of £14.2m.

The company is looking for growth mainly through large scale urban regeneration projects including Wembley, Greenwich, City Park Gate, Middlehaven, Emersons Green and Brighton. Given that improvements to these run-down sites will generally lead to increases in values, the major downside is that if the market slows further, the company will be left with substantial stocks of unsold buildings.

The company’s assets are split as follows: 59.5% in ‘Special Projects’ (ie large scale regeneration projects, 23% in the investment portfolio and the rest in fund management.

Quintain has significant exposure to the residential market as its schemes at Wembley and Greenwich include consent for approximately 14,500 residential units, of which 61% are private. The company is hopeful that demand for London housing will remain reasonably resilient.

Surprisingly enough, the company is pessimistic in its outlook for the commercial property market.

“Disconnect between the investment and occupational markets, high levels of indebtedness, prospective increases in interest rates and an uncertain economic outlook, both domestically and overseas, is conducive to a stabilisation if not fall in market prices�.

Quintain claims to have factored this fact into their planning (which may explain the high exposure to the residential market in some of its projects).

In essence, the company is a long term play on regeneration projects with the investment portfolio serving to generate shorter-term cash for running the business.

The share trades at 583.98p, at a premium to its NAV with a yield of 2.1%.