A possible PYAD share?
Posted: July 24th, 2022, 5:05 pm
I put this here as if you half close your eyes, squint a bit and put your head on one side like paddington it could just about be called “company analysis.” Apologies for misposting if that’s wrong.
Anyway back in the long long ago a certain TMFPyad used to write interestingly and pungently on value shares, one of Stephen Blands’ many ideas being based on a certain type of deep value share called a PYAD. I can barely remember all the key metrics but it was something like :
PE ratio 2/3 or less of FTSE (P)
Yield 2/3 greater than the FTSE (Y)
Assets – current price less than the Book value of the share (A)
Debt – little or no debt preferably net Cash (D)
There were a number of other tests such as adequate size – greater than £100m – call it £400m market capitalization now? A forecast earnings per share increase 20% or more than the current earnings – in order to drive the price, and a lack of overseas doubtfulness where perhaps managerial and political ethical and fiduciary standards were not all they could be. I think it rhymed with pongo --as a smell test. Directorspeak should also be positive.
Anyway the last two of the PYAD filters (A,D) are rarely found in combination with some occasional exceptions one of which could currently be Bellway plc the housebuilders.
Bellway is currently sitting at net cash (£160m) and the end of year cash balance is also forecast to be positive at around £200m. So let’s tick the “D” filter, ie no D – the reasoning is that companies that go bust often tend do so because of debt.
Currently trading at around 2400p, close to pandemic levels, per share the book value (mainly land) is approx. 2778p (IC figures) – a useful discount from book value also expressed as a price to tangible book ratio of 2400/2778 = 0.85 – perhaps not a stonking book value bargain, but has been down to as little as 2070 recently and may be so again. House-builders do sometimes trade below book value and some old lags may remember that discount can persist for a while, but it’s not hugely common. (discuss) so lets approve the “A” filter .
Market cap is about £3bn (at 2400p) which seems more than adequate. Passed.
Currently the Bellway PE ratio is quoted on Yahoo at 7.2 which seems about half the FT250 of 15.1 (IC figures) or 14.6 FT100 although though no doubt these are calculated differently so caveat emptor as usual.
Similarly the yield is given as 5.3% which is about double that of the FTSE250 of which Bellway is a member, and is about 47% more than the FTSE100 at 3.6%. Anyway these two metrics historically are typically easy to find in value type shares, the difficult ones to pass are net cash, and price below tangible book.
The director-speak reads positively to me, and Mr Honeyman has put his Bellway divs where his mouth is with a useful 28.6% increase in the interim dividend from 35p to 45p -see the recent trading update on the Bellway investors website.
The one question mark I do have is that since it seems broker forecasts are not as easily available as they once were were (to me at least) and I would be interested to know what the consensus is for 1 year out, looking for 20% or more of course. Sales look to be about 10% up on prices broadly flat – so that may not hit the PYAD target. Of course all the builders have been hit by the fallout from the Grenfell situation but it seems to me that Bellway has enough put aside (discuss) with current provisions and supplier clawbacks.
Otherwise it does seem to me that this is a possible PYAD share –– this is the first I’ve seen for many a long year though since Refs died my analysis has become less thorough. Anyway I have some of these and will hold for a few years I expect while the divs roll in.
Due acknowledgement for the framework of ideas cited here is given to Mr Stephen Bland who invented the term PYAD on the greatly missed TMF value board and his amusing and direct value articles.
csh
Anyway back in the long long ago a certain TMFPyad used to write interestingly and pungently on value shares, one of Stephen Blands’ many ideas being based on a certain type of deep value share called a PYAD. I can barely remember all the key metrics but it was something like :
PE ratio 2/3 or less of FTSE (P)
Yield 2/3 greater than the FTSE (Y)
Assets – current price less than the Book value of the share (A)
Debt – little or no debt preferably net Cash (D)
There were a number of other tests such as adequate size – greater than £100m – call it £400m market capitalization now? A forecast earnings per share increase 20% or more than the current earnings – in order to drive the price, and a lack of overseas doubtfulness where perhaps managerial and political ethical and fiduciary standards were not all they could be. I think it rhymed with pongo --as a smell test. Directorspeak should also be positive.
Anyway the last two of the PYAD filters (A,D) are rarely found in combination with some occasional exceptions one of which could currently be Bellway plc the housebuilders.
Bellway is currently sitting at net cash (£160m) and the end of year cash balance is also forecast to be positive at around £200m. So let’s tick the “D” filter, ie no D – the reasoning is that companies that go bust often tend do so because of debt.
Currently trading at around 2400p, close to pandemic levels, per share the book value (mainly land) is approx. 2778p (IC figures) – a useful discount from book value also expressed as a price to tangible book ratio of 2400/2778 = 0.85 – perhaps not a stonking book value bargain, but has been down to as little as 2070 recently and may be so again. House-builders do sometimes trade below book value and some old lags may remember that discount can persist for a while, but it’s not hugely common. (discuss) so lets approve the “A” filter .
Market cap is about £3bn (at 2400p) which seems more than adequate. Passed.
Currently the Bellway PE ratio is quoted on Yahoo at 7.2 which seems about half the FT250 of 15.1 (IC figures) or 14.6 FT100 although though no doubt these are calculated differently so caveat emptor as usual.
Similarly the yield is given as 5.3% which is about double that of the FTSE250 of which Bellway is a member, and is about 47% more than the FTSE100 at 3.6%. Anyway these two metrics historically are typically easy to find in value type shares, the difficult ones to pass are net cash, and price below tangible book.
The director-speak reads positively to me, and Mr Honeyman has put his Bellway divs where his mouth is with a useful 28.6% increase in the interim dividend from 35p to 45p -see the recent trading update on the Bellway investors website.
The one question mark I do have is that since it seems broker forecasts are not as easily available as they once were were (to me at least) and I would be interested to know what the consensus is for 1 year out, looking for 20% or more of course. Sales look to be about 10% up on prices broadly flat – so that may not hit the PYAD target. Of course all the builders have been hit by the fallout from the Grenfell situation but it seems to me that Bellway has enough put aside (discuss) with current provisions and supplier clawbacks.
Otherwise it does seem to me that this is a possible PYAD share –– this is the first I’ve seen for many a long year though since Refs died my analysis has become less thorough. Anyway I have some of these and will hold for a few years I expect while the divs roll in.
Due acknowledgement for the framework of ideas cited here is given to Mr Stephen Bland who invented the term PYAD on the greatly missed TMF value board and his amusing and direct value articles.
csh