With that being the case, I think property stocks are now a much better investment than buy-to-let property and today I’m going to highlight two property stocks that I believe can help you make a million.

Deep value

The first company is Inland Homes (LSE: INL). This immediately looks to me as if it is a deep value investment. It is trading at only 85% of book value, a forward P/E ratio of 7.2 and it supports a dividend yield of 4.3%.

It’s not immediately clear why the market is giving this business such a wide berth. Over the past six years, net profit has risen by more than 300% as the property development, and regeneration specialist has benefited from the UK’s booming property market. Over the same time frame, Inland’s dividend to shareholders has increased tenfold, and it looks as if management can improve the payout further. It is covered three times by earnings per share.

Undervalued 

The figures above tell me Inland could be a much better investment then buy-to-let. For a start, the stock is undervalued by around 50% compared to the rest of the UK real estate sector, which trades at a forward earnings multiple of approximately 16. On top of this, earnings per share increased at around 30% per annum for the past five years, while this rate of growth is clearly unsustainable over the long term, analysts have pencilled in high single-digit earnings growth for the next two years.

This growth, coupled with the group’s 4.3% dividend yield, implies the stock could return around 10% per annum for the foreseeable future, that’s without including an increase in valuation to the sector average.

An investment of £100,000, roughly the same amount as a deposit required on a buy-to-let property, would grow into £1m after 25 years with a return of 10% per annum.

Capital property 

Another property company that I think and help you make a million is Helical Bar (LSE: HLCL). 

Helical is focused on the ownership and development of property mainly in and around London, and its track record of creating value for shareholders is impressive. For example, since 2013 book value per share has increased by 16% per annum. 

Unfortunately, the stock is currently trading at a discount to book value of around 27%, so this value creation is not entirely reflected in the stock today. Still, if the company continues to do what it has done in the past, I think it is highly likely that over the long term, the shares will trend towards the current book value of 463p and possibly higher as the firm continues to create value for shareholders. 

And as the company’s property portfolio is located in and around London, I think there’s a high chance an opportunistic buyout offer could be tabled for the group. 

On top of the deeply discounted valuation, the stock also supports a dividend yield of 3.1%, which implies shareholders could see an average annual return of 19% on their money through a combination of book value growth and dividends.

The post Forget buy-to-let. I think these property stocks can help you make a million appeared first on The Twelfth Magpie.

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• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
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• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Inland Homes. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Since April the company has sold £315m of investment assets at prices in the aggregate of 2.5% above book value. These disposals have funded reinvestment activities as well as debt reduction. 

Net borrowings have fallen by £236m, substantially reducing the firm’s loan ratio from 55%, at 31 March 2016, to today’s pro-forma ratio of 43%. This debt reduction will be good news to shareholders as Helical’s high level of debt has historically been a major criticism of the group and its investment case. 

Now management is focusing on generating the most income from the firm’s portfolio. Within Helical’s results for the six months to 30 September published today, CEO Gerald Kaye said: “With our portfolio of high-quality London and Manchester offices and higher-yielding logistics properties, we now look forward to increasing our income stream from the current contracted rents of £45m towards the portfolio’s ERV of £65m as completed office space is made available to potential tenants in the next 12 months.”

Set to push higher

This realisation of the company’s full potential could, in my opinion, drive a re-rating of the shares. 

At the end of September, its net asset value per share was 465p, 51% above the current price. Over the past 12 months, the share price has gained 20% as the restructuring has unfolded and investors have bought into the growth story. 

Shares in the real estate business are changing hands for less than £5 at £3.08 today. This low share price is not an indicator of value, but the vast discount to net asset value is. As well as this enormous discount, the shares support a dividend yield of 3%. 

Helical is not the only UK property company trading at a discount to net asset value. U and I Group (LSE: UAI) is another deeply discounted income stock. 

Double-digit returns

U and I is a property regeneration company. Profits are lumpy, and the business is dependent on debt to get projects off the ground. However, these factors should not detract from the investment proposition. 

Management is targeting a 12% post-tax total annual return from property development profits and dividend income. So far this year, the company has generated development and trading gains of £6.7m taking the level of gains delivered since the start of the financial year to £16.1m, against a full-year target of £65m to £70m as legacy projects are divested. 

For the six months ended 31 August, U and I’s net asset value per share was reported at 269p, 42% above the current price of 190p. 

As well as this deep discount, City analysts are expecting the firm to distribute all excess earnings to investors for the fiscal year ending 28 February 2018. A dividend payout of 17.9p per share is projected, giving a potential dividend yield of 9.3%. The payout is expected to fall back slightly next year, but the yield is expected to remain at an attractive 6.2%.

The post 2 great stocks for under £5 appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Shares in Poundland (LSE: PLND) haven’t done too well since the cut-price shopping chain came to market in March 2014. The timing didn’t seem unreasonable, with the UK coming out of recession and a bit of optimism appearing, but Poundland shares started to fall in August 2015, and now they’re down 55% to 174p since flotation.

The company’s acquisition of 99p Stores looks set to contribute to a 37% fall in EPS this year, but I think any downgrading of the shares on that basis is short-sighted. I know forecasts are hard to evaluate at this early stage, but the 59% rebound predicted for the year to March 2017 followed by a further 22% growth penciled in for the following year would drop the P/E down to around 10.5. It would also provide PEG ratios of 0.2 this year and 0.5 next, with growth investors typically seeing 0.7 and below as a good indicator.

So, on growth fundamentals, Poundland now looks attractive, and there’s a progressive and well-covered dividend to be had too. The yield based on expectations for the year ended in March this year would only be around 2.5% — results are due on 16 June, with the firm’s Q4 update calling it a “transformative” year. But the yield is set to reach 3.9% in two years time. Worth tucking away for a decade? I think so.

No more paper?

Shares in Trinity Mirror (LSE: TNI) seem to be perpetually cheap, and are currently on a forward P/E of only around 3.5. Of course, fears for the future of actual printed newspapers weigh heavily on the company, especially after the failure of The New Day which only lasted nine weeks before the plug was pulled.

But the company has been on the acquisition trail, owns an increasing stable of online publications, and its fundamentals actually don’t look too bad at all. Earnings are expected to grow this year and next, albeit slowly, and dividend yields (which would be covered more than fivefold by earnings) of 4.7% and 5.3% are predicted for the two years.

I reckon reports of the demise of the company are greatly exaggerated, and for long-term investors I think there’s profitable life in Trinity Mirror shares yet.

Change of focus

Helical Bar (LSE: HLCL) is a property investment and development group, and it has recently switched its focus towards the London market — and in results released on Tuesday it reported record pre-tax profits of £120.1m for the year ended in March. The company’s property portfolio is now apparently valued at £1.23bn, which is a 21% improvement on a year previously.

As he ends his 32-year tenure as chief executive, Michael Slade said that

“Since 2012, we have targeted an income producing investment portfolio representing at least 75% of our total property assets with our development programme making up the remaining 25% which is capable of producing exceptional profits“

and told us the firm has exceeded its targets.

Mr Slade did point to a possible Brexit from the EU as presenting risks, but Helical Bar looks like one of those companies that is genuinely looking at the long-term prospects for its business, and that can only be a good thing.

The post 3 small cap shares for the next decade: Poundland Group plc, Trinity Mirror plc, Helical Bar plc? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Limited upside

Looking ahead, Helical Bar is expected to deliver rapidly rising profitability in the next two years. For example, its bottom line is due to rise by 97% in the 2017 financial year and by a further 36% in the 2018 financial year. This puts it on a forward price to earnings (P/E) ratio of 26.9, which indicates that its shares are richly valued at the present time. So, while the company may be starting a much more profitable era, its shares seem to offer limited upside. Therefore, other property companies may be better buys at the present time.

Also releasing significant news today was UK-based technology group Servelec (LSE: SERV). It has agreed to buy Tribal’s Synergy unit for £20.25m in cash, which will provide the company with growth opportunities as local authorities begin to take responsibility for children’s community health in the coming years. And with Servelec also announcing the award of multiple contracts for its technologies division from utility companies, it appears to be on the road to rising profitability.

Encouraging progress

Furthermore, Servelec’s results (also released today) show that the company is making encouraging progress. For example, revenue increased by 22% in 2015, while earnings per share soared by 25%. And with the company’s bottom line forecast to rise by 12% this year and by a further 14% next year, Servelec seems to be a strong growth play which could continue its share price rise of 15% over the last year. With its shares trading on a price to earnings growth (PEG) ratio of 1.1, it seems to offer excellent value for money, too.

Meanwhile, industrial fuel cell power company AFC Energy (LSE: AFC) is also at the start of what could prove to be a new era. After a successful 2015, it today announced eight new milestones which it is aiming to achieve during the course of 2016. They include the development of a second generation fuel cell stack and Balance of Plant during the second half of the year, as well as the conclusion of the basic design and engineering on a single cartridge 10kW system and a 1MW capacity fuel cell system. In addition, AFC Energy is seeking to commence scoping studies for at least three international fuel cell projects and secure contracts for at least two of them.

A whirlwind year

The news, however, has not been well-received by the market and AFC Energy’s shares have fallen by around 16%. Part of the reason for this fall could be a perceived delay regarding the company’s progress after such a whirlwind 2015 which saw the company’s shares rise from around 10p at the start of the year to reach 58p by July.

However, with AFC Energy continuing to make solid progress towards its goals and setting out a clear strategy for the next twelve months, it continues to be worth a closer look for less risk averse, long term investors. That’s especially the case with cleaner energy likely to become a more important industry in the coming years.

The post Is This The Start Of A New Era For AFC Energy plc, Helical Bar plc And Servelec Group PLC? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Peter Stephens owns shares of AFC Energy. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.