London-focused residential property developer Telford Homes (TEF:AIM) is confident it can exceed £50m in pre-tax profit in the year to 31 March 2019.

The company has delivered better than anticipated pre-tax profit in the year-end March 2018, posting a 35% rise to £46m, compared to expectations of £45m.

If Telford can exceed pre-tax profit of £50m next year as it would mean the property developer has doubled pre-tax profit over a four year period.

Over the last few months, house prices in London have fallen compared to more affordable regions of the UK as inflation continued to outstrip wage growth.

The abolition of stamp duty for first-time buyers for homes worth over £300,000 has also encouraged people to look for more affordable properties.

Telford has experienced this to an extent as homes priced over £750,000 are taking longer to sell.

LOW SUPPLY AND HIGH DEMAND

Telford says it is benefitting from an ‘under supply’ of new homes in London and demand for more affordable homes, particular for renting.

It expects to take advantage of this demand by focusing on the build-to-rent sector across London.

Because these projects are often pre-funded by institutional investors this enables the company to grow without taking excessive risk or needing additional equity capital.

Since Telford’s share price hit a one-year low of 364.2p in September last year on Brexit-related concerns, the stock has rallied 23.5% to 450p.

Canaccord Genuity analyst Aynsley Lammin says Telford’s valuation is ‘less compelling’ after its recent share price run, but it is well supported with improved visibility on profits and growth.

Telford currently trades on a forecast 8.1 times earnings per share in 2019.

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Issue Date: 30 May 2018