3 Ways To Profit From the Buy-To-Let Boom ? LSL Property Services plc, Countrywide
Wed 14 May 2014
Right now the UK property market is booming. However, an often overlooked aspect of this boom is the buy-to-let market, which is also reporting rapid growth, as first time buyers are pushed out of the property market due to rising prices.
Indeed, international property company Savills believes that up to a million more renters will be looking for homes within the UK during the next five years. Managing these properties is usually a lucrative business, as revenues are recurring and contracts guarantee income for an extended period.
So, here are three of the best ways to play this trend.
Rightmove Plc (LSE:RMV) is the UKs number one property website and is benefitting from a strange
phenomenon called property porn. This property porn movement is driving Rightmoves growth -- the companys website traffic jumped up by 14% during the first three months of this year. Actually, during January of this year, visitors to Rightmoves website viewed a total 1.45 billion pages of property, making Rightmove one of the UKs top websites in general. The great thing about a business like Rightmoves is the fact that the company has very low overhead costs, but generates large amounts of cash. Indeed, during 2013 Rightmove generated 83m in cash from operations, but
capital spending only totalled 1m. Rightmove is returning as much of this cash to shareholders as it can. The company spent 57m buying back stock during 2013 and returned 25m to investors via dividends. Further, during the first three months of this year, Rightmove acquired an additional 1.2m shares at a cost of 30.8m. Current City forecasts expect Rightmoves pre-tax profit to jump 21% this year, followed by growth of 14% to 113m during 2015.
National property group Countrywide PLC (LSE:CWD) is another play on the UKs booming property market and buy-to-let business. Countrywide has a national presence and with a market cap of over 1bn the company should have a place within any property focused portfolio. Countrywide is both an estate agent and a lettings agent, so is able to profit whether the property market is going
up and down, as the letting business gives a stable, predictable flow of income.
The company reported strong demand from buy-to-let landlords during the first quarter, reporting a year-on-year rise of 28% in the number of residential properties under management. As a result, lettings revenue jumped 20% from the same period last year.
Whats more, due to Countrywides size, the company was able to achieve impressive economies of scale and while revenue only rose 20%, gross profit jumped 50%.
LSL Property Services plc (LSE:LSL) is a one stop shop for property and related services. The company conducts the sale of residential property, provides lettings services, surveying, mortgage advice and services to mortgage lenders, including valuations, asset management and property management.
LSL also owns the Marsh & Parsons brand, a London estate agent and lettings agent, which is growing rapidly. Marsh & Parsons reported revenue growth of 23% during the four months to 30 April. Overall, LSL reported that during the first four months of this year total income grew 24% and lettings income ticked higher by 12%. Its financial services income jumped 33%.
Additionally, LSL is also benefitting from the property porn movement, as the company owns a 5% stake in Zoopla Property Group Ltd, owner of the Zoopla property website. Like Rightmove, Zoopla is experiencing record levels of traffic this year and there is chatter that Zoopla could be looking to go public, which would be a windfall for LSL.
For example, Countrywide holds a 6% stake in Zoopla and the company registered gains of 28m on the value of this investment.