How to make money on the real estate market growth. Part 2. Buying stocks
At the moment the real estate market is growing. In this tred we are considering how to make money on it.
Buying shares of developers
High demand for real estate means a potential increase in developers ‘ profits. PIK and LSR are among the largest representatives of the sector on the Moscow Exchange.
The leader of the Russian housing market. It implements projects in 12 regions of the country, focusing on Moscow and the Moscow region. In the first half of 2020, the company showed excellent financial results. Revenue growth was 33%, EBITDA and Net profit increased by more than 80%.
Despite the rapid growth of shares from may to November this year, the company’s multipliers remain at a moderate level, which does not allow us to call the company overvalued.
The high share of mortgages in the sales structure (77% for 9 months of 2020) will support the company’s revenue in low-interest conditions. According to the company’s strategy, it plans to expand its territorial expansion. A moderate level of debt burden will allow you to easily raise capital for these purposes, if necessary.
The second-largest developer in Russia, conducts projects in Moscow, St. Petersburg and Yekaterinburg. In 2020, it showed strong results. For 9 months, sales increased by 16%. EBITDA and Net profit in the first half of the year increased by 17% and 38%, respectively.
Dividends play an important role in the LSR investment case. In 2015-2019, the company adhered to the fixed payments in the amount of RUB 78 per share. In 2020, the company retreated from this rule amid the COVID-19 pandemic. In 2020, 50 rubles were paid. per share.
In 2021, the company may return to 78 rubles, which will support the attractiveness of securities in conditions of low rates. For the period from 2016 to 2019, the dividend yield of shares on average included a premium of 2-2. 5% to the rates of 5-year OFZs. This gives us a benchmark fair return in the region of 7.3–7.8%. With a dividend of 78 rubles, the securities will provide such a yield at a price of 1000-1070 rubles per share.
Read the following in chapter 3.