There is one key to driving a share price upwards – this housebuilder has it

According to a bit of on-the-spot research combing the Regulatory News Service each day, UK-listed companies have beaten or upgraded expectations on 72 occasions when they have released results or a trading update, while 62 have missed or lowered forecasts. That statistic does not necessarily fit with the gloomy tone which tends to characterise analysis of the UK equity market.

While it is far from uniformly positive, the balance is at least tilted in the correct direction, and this may help explain why the UK equity market is ticking gently higher in 2025. Having an attractive valuation is one thing, but you still need a positive catalyst to make people take a closer look and start buying in the view that value may be unlocked, and this takes us to Springfield Properties.

We cannot pretend that our initial study of the Scottish housebuilder was on the mark. Three years of patient support have yielded a share price fall of one third and just 7.2p a share in dividends, a sum not large enough to cover the capital loss. Higher interest rates, increased input costs and a sluggish economy have all hurt.

However, the Elgin-headquartered company’s latest first-half results offer more than enough to keep value-seekers interested. Reservation rates have started to improve, albeit in a tentative way, cost cuts have started to bring benefits and the sale of land to Barratt Redrow has served to highlight the degree of asset-backing at the company and the lowly valuation of the shares, while also reducing the company’s risk profile.

Springfield has sold 2,480 plots of undeveloped land for £64.2m. It will receive the cash over four years and management will use the funds to reduce debt as well as invest in future growth. As regular readers know, this column is a great believer that less debt means less risk and less risk can mean a higher share price, or at least a higher multiple of earnings, all other things being equal.

The deal should also focus attention on how Springfield’s stock market valuation of £119m compares to the company’s tangible net asset value of £154m. That 23pc discount will hopefully provide shareholders with some downside protection but also upside potential, as and when the housing market turns – as it surely must at some stage, given the prospect of lower interest rates and the burning need for affordable housing in Scotland.

Questor says: hold
Ticker: SPR
Share price: 100.5p

Update: Assura

UK real estate plays are still in the doghouse, judging by the poor performance of the FTSE 350 Real Estate Investment Trusts (Reits) sector and the wide discounts at which many property plays trade relative to their asset value. But private equity and trade buyers continue to snap them up, and that is good enough for us, especially as one portfolio holding – Assura – is the latest name in the predators’ frame.

Our updated analysis of the healthcare building specialist flagged both the juicy dividend yield and also how the stock traded at a big discount to the last published net asset value (Nav) of 49.4p per share. Lo and behold, US private equity giant KKR tabled a cash bid of 48p a share on 21 February while America’s Universities Superannuation Scheme also nosed about, only to withdraw.

KKR’s offer represented a 28pc premium to the undisturbed share price but it also came in nearly 3pc below Nav and Assura’s management was quick to reject the approach and recommend that shareholders did nothing. That explains why the share price has retreated to some 10pc below KKR’s offer.

It is also advice that this column is happy to take. The private equity bid – actually KKR’s fourth, non-binding proposal – highlights the value case for the shares. Note that seven other Reits have been subject, and succumbed, to takeover offers in the past two to three years. In those cases, the average share price premium paid was 24pc and the average discount to Nav has worked out at just under 8pc. In that context, KKR’s 48p price is not out of kilter but two of the prior seven transactions were struck at a premium.

In addition, we can afford to wait and see what happens next. Assura’s shares come with a forecast dividend yield of 7.5pc, according to analysts’ consensus forecasts of a distribution of 3.32p a share for the fiscal year to March 2025. Given the current share count, that equates to a total sum of around £108m, a figure comfortably covered by net rental income.

Questor says: Hold
Ticker: AGR
Share price: 42.96p

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