๐๐๐ง๐๐ ๐ฎ๐ฌ๐ฎ๐ฒ ๐ช๐ฅ๐๐๐ฉ๐
Since no one knows when the Strait of Hormuz will open or the extent of damage to energy infrastructure, I'm not even going to speculate on the outcome. Trading the situation is complicated by wild volatility driven by the reality of energy shortages and Trumpโs comments alluding to de-escalation every other day. I have raised the portfolioโs cash to ~29% and am waiting for this to play out. Itโs easy to get tempted to go to an all cash or energy portfolio during this time, however Iโm cognizant that this too shall pass and at that time youโd want to be fully invested. Valuations will likely bottom way before a resolution to the war becomes apparent. Iโll deploy the cash balance if we get further drawdowns.
๐๐ค๐ง๐ฉ๐๐ค๐ก๐๐ค ๐๐ค๐ข๐ข๐๐ฃ๐ฉ๐๐ง๐ฎ
$VTY.L (Vistry Group PLC) 's sell-off has contributed to the majority of the portfolioโs YTD drawdown. Analyst concerns stem from a mix of short-term headwinds and plain irrelevant factors. Specifically, Vistry applying discounts of 5-10% on their open market sales is a worry for analysts. The discounts are being applied to speed-up the rundown of their legacy housebuilding inventory and in doing so freeing up working capital. This is working as evidenced by sales rates having increased by 40% during the first 10 weeks of 2026. If you discount by 10% and sales increase by 40% it still means revenue is growing, albeit at a lower (positive) margin. The open market sales are only 25% of their sales by volume, the rest of the sales are in their partnerships business which aren't subject to discounting.
Vistry is now trading far below liquidation value. Adding up Vistryโs land ownership, cash and trade receivables it amounts to ยฃ15/share in fairly liquid assets. Vistryโs total liabilities amount to ยฃ9.3/share. The difference is their liquidation value, i.e ยฃ6/share which is 85% higher than their current stock price. Even discounting their land inventory by 20%, liquidation value still comes out at ยฃ4.1/share, or 26% higher than the current stock price. During the GFC UK home prices fell by 20%, so the market is pricing Vistry as if something worse than the GFC might happen to UK home prices. Meanwhile UK house prices are at all-time highs and rising. On an earnings basis Vistry is trading at a fwd EV/EBIT of <4x and a fwd P/E of 6x. These multiples are near all-time lows.
The other concern is the slowdown in housing completions in 2025. Since Vistry is now primarily a partnerships business, they get the majority of their funding indirectly from the UK government via the affordable homes program (AHP). The funding for AHP is agreed on with every new budget approved by the government. Funding delays during the transition from the 2021โ2026 AHP to the 2026โ2036 programme caused a temporary slowdown in new housing association developments. This funding is going to start flowing in full during the H2-2026 which is the catalyst Iโm waiting for and believe this is going to increase Vistryโs financial return materially.
I find analyst concerns about liquidity pressure and the CEO retiring as unfounded. The liquidity concerns assumes a worst case scenario without any mitigating actions from management. There has been reporting about Vistry stretching payments to some suppliers. This is management actively improving the working-capital cycle rather than a liquidity crunch. Vistry needs working capital to operate and they finance this mostly with debt which is why their avg daily net debt runs around ยฃ750m. Vistry has >ยฃ1b in undrawn debt facilities to fund their working capital without any problem. Additionally they have just over ยฃ1b due to land creditors and suppliers in FY26. Offsetting this is their work in progress (WIP) of ยฃ1.3b. These are houses currently under construction and on average it takes Vistry 4.5 months to complete construction on a house and sell it. Their WIP more than offsets their creditor & supplier dues. Importantly, in the Partnerships business, construction only begins once the housing association has secured funding, so there is no risk of non-payment once building starts.
The CEO bought an additional ยฃ900k of shares last month. I estimate fair value to be ยฃ12 - ยฃ17 in a 2-3 year time frame.
$BFIT.NV (Basic-Fit N.V) released FY25 earnings in March. They delivered as expected. Bfit is now trading at a trailing P/FCF of 10x. On 2026 earnings, driven by more clubs reaching maturity, Bfit is trading at 8x FCF. Their FCF is tracking as expected, however the multiple the market is assigning to the FCF is lower than I expect. My thesis is that their FCF multiple should be at least 12x, which gets you to the target fair value price of ~โฌ45 per share. A re-rating in the multiple would likely require management to start a capital return program to shareholders, however I dont think that is on the cards currently as they are reinvesting everything into opening new clubs. Iโm still thinking about the right allocation to this.
Best regards
Jacob
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Not investment advice. The author may have financial interests in the mentioned instruments.
Great analysis, I have a question, given that Vistry is already offering 5โ10% discounts on openโmarket homes to accelerate sales, doesnโt it follow that both completed properties and WIP should also be haircut in a liquidation scenario? ... Show More
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