Can St. Modwen Properties plc deliver capital growth after today’s update?

Does St. Modwen Properties plc (LON:SMP) (SMP.L) offer upside potential?

St. Modwen
St. Modwen

The St. Modwen Properties plc (LON:SMP) (SMP.L) share price is up by around 1.5% so far today after the commercial and residential property company released a trading update for the period ended 30 November 2018.

The company has stated that it has delivered against its objectives. It has seen structural growth in its two key sectors, industrial/logistics and regional housebuilding, even though the prospects for the wider economy have been uncertain.

It has reduced its borrowings by over 50% in the last 18 months, with asset disposals helping to provide lower levels of leverage. This could help to position the company in terms of delivering its pipeline, while the short cycle nature of its projects could provide it with flexibility to adjust its pipeline should demand levels change in the near term.

St. Modwen has already exceeded its disposal targets for 2018. It will continue to position its portfolio towards assets and sectors that offer the strongest structural growth potential, and expects the volume of disposals in future to moderate.

It will accelerate its commercial development activity. It has also seen good demand in its residential and housebuilding business, with sales volumes increasing by 22% to 848 units. This is in line with its aim of increasing volumes by up to 25% per year by 2021. Investment in regeneration projects has continued, with the company being of the view that it is well-placed to deliver on its medium-term objectives.

In my opinion, the long-term prospects for St. Modwen appear to be relatively positive. The company seems to have a sound strategy which it is successfully executing. In the near term, there could be some disruption from Brexit in my view, with investor confidence potentially coming under pressure depending on how the process of leaving the EU moves ahead.

As someone who is optimistic about the housebuilding sector in the long run, as well as the wider economy, the stock seems to have investment appeal. But its shares could be volatile in the near term depending on how investors view the final Brexit deal/no-deal.

About Robert Stephens 5151 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email [email protected] or use one of the other contact methods available on the 'Contact Us' page