Open door to Berkeley Group

Berkeley Group has had a strong start to the year and, while the market has returned to normal levels and the order book has remained flat since April, there's enough here to pique interest in the London housebuilder.

"Demand for the right product with good design in the best locations has remained resilient," said founder and chairman Tony Pidgley, "and, reflecting this, forward sales have been maintained at the levels previously reported."

Admittedly, an order book of £2.2 billion was a little light of JPMorgan's estimate. Of course, the double-digit quarter-on-quarter growth rate seen last year was unsustainable, and it's worth remembering that quarterly numbers can often be skewed by timing of new developments coming on stream for reservation.

Berkeley has delivered around 15,750 new homes in London and the south east of England over the past five years and has made further progress extending its portfolio of land over the last three months. The firm has over 11,000 plots and an attributable potential gross margin of around £1.5 billion at the last year-end.

There's strong operating cash flow, too, boosted by the disposal of its ground rent assets from just under £100 million in June, and the group reckons it can remain debt-free after the £122 million dividend pay-out later his month, worth 90p per share.

Another 180p is needed to meet Berkeley's special dividend target of 434p per share by September 2015. Its next milestone of 433p per share in September 2018, should be partly met with regular dividend payments, said the firm.

Using JPMorgan forecasts and a share price of 2,398p, Berkeley shares trade at a big premium to net assets, but on less than 9 times forward earnings. There's a 7.5% dividend yield, too. Riding out short-term weakness could pay off here.