Irish Housing Undersupply Will Drive Strong Long Term Homebuilding Demand

Catalysts

About Glenveagh Properties

Glenveagh Properties is an Irish homebuilder focused on large scale delivery of own door homes and public private housing partnerships.

What are the underlying business or industry changes driving this perspective?

• Acute housing undersupply in Ireland, supported by robust population growth, rising incomes and sustained net inward migration, underpins Glenveagh’s forward order book and is expected to support continued revenue growth and volume expansion beyond 2026.
• Escalating government ambition and funding for housing delivery through the National Development Plan, Planning and Development Act 2024 and schemes such as Help to Buy, First Home Scheme and Croí Cónaithe is entrenching Glenveagh as a preferred state partner. This supports durable, high margin Partnerships revenues and earnings.
• Scale homebuilding on repeatable, standardized, large sites combined with vertical integration and off site manufacturing through NUA, including the licensed facade system, is structurally lowering build risk and contingency usage. This supports sustained mid 20s gross margins and improving operating leverage.
• A well located landbank concentrated in the Greater Dublin area with low average plot costs and capacity for 2,600 to 3,600 units annually to 2030 gives clear volume visibility. The planned reduction of land capital from peak levels should enhance return on capital employed and free cash flow.
• Disciplined capital allocation through active land disposals, tight working capital management and an expanded share buyback program is converting operational momentum into lower net debt and higher earnings per share. This may also support a potential re rating as the market reflects stronger through cycle cash generation.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Glenveagh Properties's revenue will remain fairly flat over the next 3 years.
• Analysts assume that profit margins will shrink from 11.8% today to 10.8% in 3 years time.
• Analysts expect earnings to reach €117.3 million (and earnings per share of €0.22) by about December 2028, down from €125.4 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 12.3x on those 2028 earnings, up from 8.2x today. This future PE is greater than the current PE for the GB Consumer Durables industry at 8.2x.
• Analysts expect the number of shares outstanding to decline by 1.69% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.7%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Glenveagh’s growth strategy relies heavily on a supportive Irish housing policy framework and sustained government funding for schemes such as Help to Buy, First Home Scheme and Croí Cónaithe. Any policy reversal, budget pressure or change in political priorities could weaken demand for both private and Partnerships units and slow revenue growth.
• The company is running at peak land investment with a EUR 536 million land balance and plans to support up to 3,600 units per year to 2030. If long-term housing demand or affordability weakens due to economic slowdown or higher interest rates, unit absorption could fall, forcing slower site build out and pressuring earnings and returns on capital employed.
• Standardization, off site manufacturing and the NUA innovation platform are central to Glenveagh’s cost advantage. Execution delays, technology underperformance or quality issues in the new facade systems and lightweight components could erode the expected structural cost savings and reduce gross margins over the medium term.
• Partnerships are becoming a material profit driver with six active public sector sites and ambitions to keep replacing them. If local authorities, the Land Development Agency or other state bodies face planning bottlenecks, funding constraints or shift to alternative delivery partners, Glenveagh could see lower contract wins and softer revenue and earnings from this segment.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of €2.18 for Glenveagh Properties based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be €1.1 billion, earnings will come to €117.3 million, and it would be trading on a PE ratio of 12.3x, assuming you use a discount rate of 8.7%.
  
• Given the current share price of €1.96, the analyst price target of €2.18 is 10.1% higher. Despite analysts expecting the underlying business to decline, they seem to believe it's more valuable than what the market thinks.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.