Thursday tips round-up: Bellway, CardFactory

There is no sign that housing is cooling off, homebuilder Bellway told investors. Since January its reservations were up by 10%, despite the uncertainty surrounding the upcoming elections. In the latest half-year, ended in January, the company increased its spend on land by 48% to hit £355m – although that will only maintain the number of plots available at its current rate of 4.8 years. Over the last 18 months the company also added three regional subsidiaries.

Operating profits surged 52% at the half-year stage as margins increased to 19.9% from 15.6%. Nonetheless, as the land purchased at more attractive prices works its way through the firm’s pipeline there would seem to be less room for those margins to increase further.

The dividend payment, which rose by 56%, was a real surprise, analysts had been discounting a 40% hike for the full-year. Even so, the dividend yield was only at 3.5%. “Buy for the long term, unless you believe that the housing boom is unsustainable,” The Times Tempus said.

Have you ever heard of Debenhams? And now, have you ever heard of Card Factory? While the two companies had an approximate market capitalisation of £1bn, the former was much more well-known. The latter’s main competitive advantage is its vertically integrated business model. It both designs and makes cards, which it then distributes through its 764 outlets.

Nevertheless, the competition in the space is rising. Clinton Cards – which is at the lower end of the market - has come out of administration, WH Smith has its own value chain and then there are the big supermarkets. Even so, the firm said it can continue to grow its like-for-like sales at a 2.5% clip each year. The company is also highly cash-generative and had been hinting at special returns to investors.

CardFactory was likely be able to stay ahead of the competition, but Tempus was “not convinced there is much immediate upside.” So avoid for now, Tempus says.