Bellway PLC Share Forecast October 2021 – Time to Buy BWY?

Shares of the UK-based residential property developer Bellway PLC (LSE: BWY) are in the green today, at 3406p as of October 20th (08:12 GMT+1). Following a significant surge in earnings and property completions, housebuilding company Bellway has increased its projected dividend distributions to investors. Bellway, the FTSE 250 Company, has launched a substantial expansion strategy following a 40% increase in sales, bringing its profitability back to pre-pandemic standards.

The share is presently trading at roughly 3,400p, after dropping to somewhere around 2,000p when the repercussions of the Covid-19 outbreak became apparent in March of 2020. It has yet to return to its pre-pandemic peak of about 4,300p, which was last observed in February, last year. At this point, let’s take a closer look if BWY is worth investing in or not.

Bellway – Technical Analysis

As per the financial statement from Bellway, the market cap of the FTSE 250 housebuilding company is at £4.133 billion with a total asset worth £4.212 billion. Whereas the total revenue for 2020 was £2.23 billion, it was £3.21 billion a year ago.

13 similar indications in the moving averages of BWY including Exponential Moving Average (10)(3333), Simple Moving Average (10)(3303), Exponential Moving Average (20)(3326), Simple Moving Average (20)(3296) and more, are suggesting a buying action. Oscillators, on the other hand, such as Relative Strength Index (14)(56), Stochastic %K (14, 3, 3)(76), Commodity Channel Index (20)(75), Average Directional Index (14)(21) are neutral.

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Recent Developments

Bellway, the UK’s 4th largest property developer, released preliminary figures yesterday. According to the reports, profit margins are expected to reach 20%, while revenue has increased by more than 40% to £3.12 billion. A relatively low base year, however, has distorted those impressive-looking figures. Last year during the Covid-19 outbreak, revenues plummeted to £2.23 billion.

Bellway is proposing a net dividend per share of 117.5p, which is up from 50p in 2020. Although this is slightly lower than its 2019 high of 1504p, it marks a massive 135 per cent increase. In addition, the company said in its preliminary results that it plans on returning one-third of after-tax income to investors in dividend payouts over the following two fiscal years.

These figures look positive, but the outcomes show a more promising strategic approach. It employed a direct approach to property purchase during the epidemic, purchasing a record 20,000 properties in the year leading up to July 31, 2021. It has also used marketing to develop itself as a compelling value house builder. In the run-up to the ‘Help to Buy’ scheme’s expiration in March 2023, Bellway reports that it plans to provide a more inexpensive range of items. As a result, it has already reported a somewhat reduced average selling price for the next year.

Should You Buy Bellway Shares?

The Newcastle-based organization acknowledged that it has been impacted by a number of supply chain issues that have impacted the construction sector as a whole, including rising steel and timber costs and a shortage of labour. The problem of large vehicles vehicle drivers and unpredictable fuel supplies is also highlighted in the preliminary report. These factors have conspired to put material supply in question. Bellway claims that these may be managed by excellent procurement practises and foresight, but acknowledges that output growth in early 2022 will be equivalent to that of 2021.

Bellway’s overall strategy and the land bank it has acquired is certainly impressive. In my opinion, investing in home builders can be a good approach to obtain further exposure to the real estate market without having to purchase a property.

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