As a result, shares such as Sirius Minerals (LSE: SXX), which has dropped 42% since reaching 38p in August, seem to be relatively unappealing. However, alongside another stock that has also endured a disappointing period of share price performance, but yet reported encouraging results on Wednesday, the investment case may now be stronger than it was a number of months ago, in my opinion.

Strong position

The company in question is property investment business Helical (LSE: HLCL). It released half-year results for the period to 30 September, with it suggesting that the business is in a strong position to deliver impressive long-term growth.

For example, it’s been able to complete two of its largest developments during the period, which leaves just two major projects outstanding. Alongside this, it’s been able to make good progress in letting space at its major projects, while also strengthening its balance sheet.

Of course, the prospects for the UK commercial property industry remain uncertain. Brexit may cause further disruption in the near term, and this could weigh on operators in the sector. However, with the Helical share price having fallen by 20% in the last six months, it now seems to offer a wide margin of safety, which could increase its investment appeal. In fact, it has a price-to-earnings growth (PEG) ratio of 0.7 at the present time, which suggests it could deliver an improving share price performance in the long run.

Turnaround potential

As mentioned, the Sirius Minerals shares have experienced a severe decline in the last few months. Given that the stock is relatively risky in terms of it having no revenue or profit, with first production of its polyhalite fertiliser not due for a few years, it’s arguably one of the more speculative shares in the FTSE 350 presently. Since investors now appear to have a more risk-off attitude, it’s therefore unsurprising that the company has seen its share price fall, with further declines possible should the wider market experience continued challenges.

As is often the case though, share price falls can lead to buying opportunities. Despite the costs of the project being higher than expected, Sirius Minerals seems to be moving ahead with the successful execution of its strategy. This could mean that its estimates for sales and profitability in the long run will still be delivered, and investors can now buy into that growth story at 22p, rather than 38p from a few months ago. As such, it could be of increasing interest to less risk-averse investors.

The post Will the Sirius Minerals share price ever recover to 38p? appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Sirius Minerals. 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.

At the same time, a number of property-related shares in the FTSE 100 and FTSE All-Share seem to offer good value for money at the present time. Here are two prime examples that could deliver superior higher risk/reward opportunities than a buy-to-let.

Improving outlook

Reporting on Wednesday was property investment and development company Helical (LSE: HLCL). It released a trading update which highlighted the good progress being made on its current development pipeline. It has completed the second and final phase of its London development, The Bower. It will also complete the first residential phase at another of its London developments, Barts Square, by the end of November.

The company has made encouraging letting progress during the period across its London and Manchester portfolios. The recent disposal of The Shepherds Building has improved its financial strength. The potential to recycle the equity released from the sale into new projects could lead to higher levels of profitability.

Looking ahead, Helical is forecast to post a rise in earnings of 46% in the next financial year. This puts its shares on a price-to-earnings growth (PEG) ratio of 0.7, which suggests that they offer good value for money. As such, now could be the right time to buy them for the long term.

Successful turnaround

Also offering the potential for high capital returns in the long run is FTSE 250 housebuilder Bovis (LSE: BVS). The company has employed a revised strategy in the last couple of years that has focused on a slower rate of growth, with an increasing focus on customer satisfaction and quality. This has been a sound move, since it was experiencing significant levels of complaints from customers regarding issues with new-build properties.

With a stronger foundation now in place, the company has the potential to ramp up its number of completions over the medium term. This is expected to contribute to a rise in earnings of 42% in the current year, followed by additional growth of 15% in the next financial year. Despite such as strong rate of forecast growth, the stock has a PEG ratio of just 0.8 at the present time.

Clearly, Brexit poses a risk to the near-term prospects for the business. Consumer confidence is weak, and this may lead to some uncertainty in the housing market. However, so far house prices have been robust, while demand for new-build properties has been high. This suggests that the imbalance between supply and demand may continue over the long run, leading to higher levels of profitability for housebuilders. As such, now could be the right time to buy Bovis, with it seeming to offer a wide margin of safety.

The post Forget buy-to-let! Consider these bargain property investments instead appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any of the shares 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.

The yields are modest, with only 1.8% expected for the year to March 2018. But they’re almost three times covered by earnings and, more importantly for long-term income, they’re strongly progressive.

From just 1.4p per share in 2013, the Iomart dividend reached 6p in 2017, and there’s 6.77p forecast for this year — and that’s massively ahead of inflation.

In fact, if you bought Iomart shares back in March 2013, you’d only have paid around 230p for them. With the price currently around the 370p level you’d be sitting on a 60% gain. But, crucially for income seekers, the forecast dividend for this year would already be yielding almost 3% on your original purchase price — with 2020 forecasts suggesting 4%.

Results

Results should be out on 12 June, and Thursday’s update suggests they’re going to be impressive. The cloud computing specialist said it “expects to deliver another strong set of results delivering good growth in both revenue and profit.“

Revenue is expected to be up around 9%, with adjusted EBITDA up from £36.6m to approximately £39.8m and adjusted pre-tax profit up from £22.4m to approximately £23.9m. That’s all pretty much in line with previous expectations.

Looking to the longer term, the company said: “Given the sustainable nature of the market opportunity, a broadening product offering and a growing reputation within the cloud industry, the board anticipates that growth will continue in the future.“

With double-digit EPS rises forecast for at least two more years, I’m seeing good growth value here — with rapidly rising dividends thrown in.

Restructuring

Property investment firm Helical (LSE: HLCL) was struggling under its debt burden, but it’s been disposing of a lot of assets to get it down, and is focusing on higher quality income-based assets. 

Investors have responded cautiously, and since last July’s low point we’ve seen the share price gaining 11%.

Thursday brought a trading and portfolio update, confirming that the company has “largely complete the repositioning of the portfolio as planned.”

With the sale of industrial assets raising £170m, Helical has now offloaded a total of more than £250m in investment assets since the end of September. What’s more, it’s been at an overall premium of 8.5% over book value, so they’ve been reasonable investments too.

Add in the sale of Helical’s retirement village portfolio and C-Space London office scheme, and we’re looking at total disposals of £352m — which has brought net debt down from £626m at 30 September, to £373m. 

New focus

The company is now focused on eight London projects and four in Manchester, and during the year it has let over 254,000 sq ft of office space in them.

With the transformation plan essentially complete, what is emerging is a company with significantly better earnings prospects, now focused on letting income from its properties rather than asset appreciation. And with its significantly smaller but better focused and more profitable portfolio, I see an attractive new phase for shareholders. 

By the time earnings are ramped up as expected by 2020, we’d be looking at a P/E of a bit over 20. But with the dividend set to grow by 6% per year and better, I see long-term value. 

The post 2 hidden dividend plus growth stocks I’d buy with £2,000 today 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
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK owns shares of Iomart Group. 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.

Strong performance

Reporting on Thursday was property investment and development company, Helical (LSE: HLCL). It announced strong performance for the period since 1 April, with the company on target to meet its milestones.

For example, it has received planning permission at Power Road Studios in London for a new 30,000 sq ft office building, as well as a 12,500 sq ft new floor on an existing building. It has also sold 11 additional residential units at Barts Square in London. As well as further sales elsewhere in the UK and an acquisition in Manchester, this suggests the company is making encouraging progress with its strategy.

Of course, the UK property industry is experiencing an uncertain period. Brexit challenges remain and they have caused confidence among investors and businesses to come under pressure. This could hurt Helical’s medium-term outlook, with its bottom line forecast to rise by just 2% next year.

Despite this, the company trades on a price-to-earnings (P/E) ratio of 34, which suggests that it lacks value at the present time. A narrow margin of safety may not be appealing at a time when the wider sector could experience a downgrade to earnings outlooks. As such, and despite a dividend yield of 3%, it seems to be a stock to avoid.

Income potential

Also operating within the property sector is construction company Galliford Try (LSE: GFRD). The company also faces an uncertain outlook, with interest rates having the potential to rise and confidence in the housing market declining.

Despite this, mortgage availability remains high and there is a fundamental lack of supply of housing. This could provide the company with a tailwind and help it to generate higher profits. This could fuel dividend growth, although at the present time the stock is among the highest-yielding shares in the FTSE 350. It currently yields 7.4% from a dividend which is covered 1.2 times by profit. This suggests there is scope for further growth in shareholder payouts – especially since earnings are forecast to rise by 51% next year.

This high rate of growth puts the stock on a forward P/E ratio of just 7.6. Even in a sector which is undervalued at the moment, this seems to be difficult to justify given the company’s positive outlook. As such, and while housebuilders may experience some challenges in the short run from Brexit, Galliford Try appears to offer a compelling investment opportunity for the long run.

The post One dividend stock I’d buy and one I’d sell appeared first on The Twelfth Magpie.

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• 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 Galliford Try. 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.

Today I’m going to look at two companies I believe have the potential to beat the market.

Order backlog up by 69%

FTSE 250 defence group QinetiQ Group (LSE: QQ) delivered a welcome return to sales growth in its 2017 financial year, which ended on 31 March.

Revenue rose by 3.6% to £783.1m, while pre-tax profit climbed 16.2% to £123.3m. Underlying earnings rose by 11% to 18.1p per share, while the dividend was increased by 5.3% to 6p. These figures give QinetiQ a trailing P/E of 17 and a dividend yield of 1.9%.

The order backlog rose from £1.3bn to £2.2bn last year. The bulk of this increase was down to a £1bn amendment to the group’s Long Term Partnering Agreement with the UK Ministry of Defence. The company says this is its “largest and most significant contract since privatisation.”

Last year’s acquisitions of Meggitt Target Systems and Australia’s RubiKon Group are also expected to drive new business, with a particular focus on international growth.

Why I’d buy

QinetiQ isn’t cheap, but the outlook seems positive and the firm’s financials are very solid. The group ended last year with net cash of £221.9m, despite a cash outflow of £65.7m relating to the two acquisitions.

The company generated an underlying operating margin of 15.1% last year. This contributed to a return on capital employed (ROCE) of 19%. That’s higher than any of the firm’s rivals in the UK defence sector.

In my view, QinetiQ’s proven profitability and healthy balance sheet mean that it remains a strong hold and a possible long-term buy.

Discount property to buy?

London-focused property group Helical (LSE: HLCL) said on Thursday that the valuation of its like-for-like London property portfolio rose by 9.8% to £666m during the year to 31 March. Contracted rents were 16.9% higher, at £27.9m.

By contrast, the performance of the group’s regional portfolio, which is focused on Manchester, fell by 2.1% to £351m on a like-for-like basis. Contracted rents of £24.3m were below the firm’s estimated rental value for the portfolio of £26.6m.

In my view, the key metrics when investing in property are yield and net asset value. Helical’s EPRA net asset value per share — an industry standard measure — rose by 3.7% to 473p last year. When compared with the current share price of 337p, this means Helical is trading at a 28% discount to net asset value.

However, if falling rental values in the regional portfolio are any indicator, property values could also fall over the next year.

It’s also worth noting that Helical has a relatively high level of gearing, with a loan-to-value ratio of 51% at the end of March. The group’s debt maturity profile is also quite short, at just 3.6 years, so Helical will need to refinance some debt over the next two or three years.

I’m attracted to Helical’s discount to net asset value, but the 2.6% dividend yield isn’t especially exciting and gearing is quite high. I’d hold for now, with a view to buying more at a lower price.

The post 2 stocks that could help you retire with £1m appeared first on The Twelfth Magpie.

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Roland Head has no position in any shares mentioned. The Motley Fool UK has recommended Meggitt. 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.

Healthy lettings

Fears for property prices might be growing, but that shouldn’t have any real effect on rental income. And today, Helical (LSE: HLCL) reported an 18% in net rental income for the first six months of the year to £24.6m, and the firm saw its net asset value per share rise by 3% to 471p . That’s way in excess of its share price of 289p, even after a 10% price rise on the day of the results.

Earnings per share fell from 13p to 4.4p, but that happens with the erratic nature of this business, and forecasts suggest a return to March 2016 levels by 2018.

Helical saw the value of its investment properties pick up 4% on a like-for-like basis, with the value of London office properties up 5.3%. That beats the trend shown by others, though it might be skewed a little by Helical’s big recent disposals — this month the firm reported the sale of warehouses to the value of £26m, and of One King Street in Hammersmith for £34.5m.

Chief executive Gerald Kaye spoke of “uncertainty in the UK real estate market and widespread debate as to whether the ‘property cycle’ has peaked or is merely pausing,”  and that’s largely been behind the plunge in the Helical share price after the Brexit vote.

Since 23 June, the price is down 28% even after today’s rise, and it hasn’t seen the same recovery as some other depressed shares in the subsequent months. Does that provide a buying opportunity?

Dividends look set to yield around 3%, and Mr Kaye reckons that “London will continue to be a World City attracting people, businesses and investors.” I think he’s right.

Brexit bargain?

Shares in St Modwen Properties (LSE: SMP) suffered the same Brexit hit. They’ve recovered a little and at 275p stand 18% down since the big day, though since August 2015 we’ve seen a fall of 44%.

For the year to 30 November, analysts are predicting an 80% fall in EPS, which would put the shares on a P/E of 14.5 — the P/E had been falling sharply in previous years ahead of the mooted cyclical downturn. Earnings can be confusing though, with rises and falls in property values included in profits, so asset values and dividends probably make more sense.

Those dividends have been steadily rising and though the yield for this year should be around a low 2.2%, it would still be very well covered and looks safe.

St Modwen’s first-half results released back in July showed a net asset value per share of 421p, which is well ahead of the brownfield developer’s share price, and commercial developments contributed more than half of its property profits in the period.

It’s still way too early to identify the eventual impact of the EU referendum result, and at H1 time chief executive Bill Oliver said “until we have more clarity we believe it is appropriate to take a more cautious approach to the delivery of our development strategy.“

St Modwen could well be a good long-term investment, but we can afford to show the same caution mentioned by Mr Oliver.

The post Helical plc is keeping its head above Brexit’s choppy waters 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.