McCarthy & Stone: Soundly Financed UK Retirement Homebuilder

Mark Walker of Seven Pillars Capital Management presented his in-depth investment thesis on McCarthy & Stone (London: MCS) at Best Ideas 2018.

McCarthy & Stone is a soundly financed UK retirement homebuilder whose business model is characterized by low operating leverage and conditional asset accumulation. In MCS’s 40 years of operation, it has enjoyed a dominant position within a largely uncontested niche. A niche with a long volume runway underpinned by an ageing population and housing undersupply. While poor historic capital allocation led to a capital restructuring during the financial crisis, the current management team’s focus on asset turns is fostering stronger capital discipline and better capital efficiency than in the past. The share price has declined 35% over the last two years, underperforming the FTSE 250 by 60%, thanks largely to a Brexit-induced de-rating. The quoted value of the enterprise is just 15% higher than the capital invested in the business, despite 25% incremental ROCE and a long runway of internal redeployment opportunities.

About the instructor:

Mark Walker is a global equity investor at Seven Pillars Capital Management, a long term value-oriented investment firm based in London. Mark has 13 years of investment research and financial analysis experience. He joined Seven Pillars from RWC Partners, where he was part of a two-person team managing a long term global equity fund. Prior to that Mark worked as an investment research analyst on the sell-side for Goldman Sachs and Redburn Partners.

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