Friday 14 December 2018

Glenveagh remains bullish in face of share price fall

Glenveagh Properties’ three co-founders, Justin Bickle, CEO; John Mulcahy, chairman; and Stephen Garvey, COO, after the company announced half-year results last September
Glenveagh Properties’ three co-founders, Justin Bickle, CEO; John Mulcahy, chairman; and Stephen Garvey, COO, after the company announced half-year results last September
Ronald Quinlan

Ronald Quinlan

"we've been a bit disappointed with the share price performance. Obviously there's a lot of different things going on in the market. Money is going from different segments at the moment. I think it's no view on the company."

When Glenveagh CEO Justin Bickle made that remark to business reporters following the release of the company's half-year results on September 3 last, Glenveagh's shares were trading at just over €1.07 - or 7 cent above the €1 price assigned to them for the company's flotation in October 2017.

Last Friday evening, a spokesman for the publicly-listed builder had nothing further to add to Bickle's comments on Glenveagh's share price, notwithstanding the fact that it has now plummeted to 90.5 cent.

"We have no additional comment on Glenveagh's share price, but we note that housebuilding sector shares in Ireland, the UK, Europe and the US are down recently, as is the wider Irish stock market," the spokesman said, by way of explanation for the downward trajectory of Glenveagh's shares over the past three months.

While Justin Bickle insisted last month that he and his management team see Glenveagh as being involved in "a long game", saying that "we're taking a three-year view on this stock", there are others who don't share that view.

Take the case of legendary businessman and veteran investor Dr Michael Smurfit as one example. According to Bloomberg data, the Monaco-based tycoon sold 853,000 Glenveagh shares on August 10 last at a price just shy of €1.11 each, realising a total of €946,830. Had he sold the same holding last Friday at 90.5 cent each, he would have come away with €771,965, and taken a not-insubstantial hit of €174,865 on his investment.

But perhaps Glenveagh is right to take the long view, and perhaps its share price is merely bearing the brunt for now of a negative judgement being applied to housebuilders. There are those within the property sector however with a different take on the possible reasons for the company's recent share price performance.

According to its critics, the very thing that others might consider to be Glenveagh's greatest strength could well be its biggest weakness.

For while the company has, in the midst of a housing crisis, lands with the potential to accommodate 11,730 homes, just under one third of it is, by Glenveagh's own admission, "shovel ready" for building.

But even if Bickle and his team decided to build out every one of their 'shovel-ready' sites in the morning, they would be facing a near impossible task in terms of finding sufficient labour.

And they would find it even harder to source that labour at the right price in the face of rising construction costs. Only recently, one of Ireland's most-accomplished developers, Ballymore chief Sean Mulryan, described build cost inflation as "the biggest risk" as the country struggles to tackle the housing crisis.

"Because there aren't enough tradesmen, they're going to call the tune - and, by the way, builders' suppliers are just going to go for it, too," Mulryan said, while predicting that the cost of construction will rise by between 7pc and 10pc in each of the next two years. Glenveagh, for its part, estimates its labour costs are growing by 6pc while the prices it pays for supplies are rising by 2pc.

As it stands, Glenveagh is still working towards a target of having 800 units under construction, as opposed to completed in 2018. To put that figure in perspective, however, it's worth noting that David Daly, a private developer with a far smaller management team, was delivering 800 new homes a year in Dublin prior to the financial crash.

Sunday Independent

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