Investors looking to cash in on the government’s ambitious housing plans should be looking at Harworth Group (HWG), according to Investors Chronicle. This long-time favourite is set to benefit massively from the biggest planning overhaul in years, which aims to speed up the construction of 1.5 million new homes.
The Planning Power Play
The UK’s planning system has been notoriously slow and convoluted, favouring NIMBYs (Not In My Backyard) over much-needed development. But Labour’s new focus on accelerating the building process could unlock huge potential for companies like Harworth.
Harworth – More than Just a Housebuilder
Harworth is a unique beast in the property sector. They’re not just building houses, they’re regenerating large sites in the Midlands and North of England. They buy cheap land, secure planning permission, build infrastructure, and then either sell the land to other developers or build warehouses themselves.
A Strong Track Record and a Diversified Model
Despite recent challenges in the property sector, Harworth has been steadily growing its net asset value and increasing its dividend for seven consecutive years. This impressive track record is built on a diversified business model that includes both residential and commercial development.
The Warehouse Advantage
In a world of online shopping, warehouses are becoming increasingly essential. Harworth’s land bank currently includes over 39 million square feet of commercial space, which is crucial for the modern e-economy. This diversification gives Harworth a vital income stream, even when the housing market is sluggish.
Unlocking Value
Harworth’s land bank is vast, with a pipeline of over 26,000 residential plots and millions of square feet of commercial space. This represents a decade’s worth of sales potential, and the company is aiming to increase its net disposal value (NDV) to £1 billion by 2027.
The Hidden Value of Strategic Land
Harworth also holds a significant amount of strategic land, which is land without planning permission. This land is likely to become much more valuable as it moves into the development stage, and analysts at Panmure Liberum estimate that this could add £300 million in value to shareholders.
The Risks and the Rewards
While Harworth is well-positioned to benefit from the planning reforms, there are some risks to consider. The government’s ambitious housing targets may be hindered by budget constraints, and Harworth may need to rely more heavily on private investment.
A Solid Financial Foundation
Harworth stands out from other property companies with its exceptionally low loan-to-value ratio of just 5%. This strong financial position allows them to take advantage of opportunities quickly and reduces the risk for investors.
Undervalued and Ready to Grow
The company’s share price is currently undervalued compared to its NDV, suggesting significant potential for future growth.
Harworth is a unique and undervalued company with a strong track record and a diversified business model. With the government’s focus on accelerating housing construction, Harworth is well-positioned to capitalise on the opportunities ahead.