3 Stock Market Stars Ready To Ride The Construction Boom: Balfour Beatty plc, Galliford Try plc And Low & Bonar plc


The British construction industry is enjoying something of a renaissance at the moment. UK construction PMI hit its highest for six years in November, and industry experts are confident that construction activity is set to surge well into the future.

Indeed, the Construction Products Association (CPA) expects output to rise 3.4% this year and by 5.2% in 2015. With this in mind, I have picked out three cracking construction plays primed for stunning growth this year and beyond.

Balfour Beatty

Although Balfour Beatty (LSE: BBY) reported a flat order book of £13.5bn in 2013, the firm looks poised to enjoy the fruits of a strong recovery on both sides of the Atlantic. While orders from the US continue to accelerate, Liberum Capital notes that in the UK “there are some exciting opportunities including roads, rail, nuclear and the recent Olympics stadium conversion win,” and that “the number of UK loss makers has been reduced significantly.

City analysts expect Balfour Beatty to report a 41% earnings crash for 2013, before rebounding strongly in 2014 and 2015 respectively with growth of 13% and 22% correspondingly. These projections create a price to earnings to growth (PEG) reading on the bargain benchmark of 1 for this year, which falls to 0.5 in 2015.

As well, Balfour Beatty also throws up great income prospects over the medium term, with dividend yields of 4.7% and 4.8% for this year and next comfortably surpassing the 3.2% FTSE 100 forward average.

Galliford Try

Homebuilder and diversified construction play Galliford Try (LSE: GFRD) reported this month that it expects to punch record half-year period for the final six months of this year. The company has been helped by a 16% rise in home prices, a bias towards the south of the country and a greater focus towards house creation.

Although the firm’s construction arm has endured more difficulties, its order book remains bubbly at £1.75bn versus £1.6bn at the same point in 2013. Indeed, Galliford Try continues to clock up major contract wins including the new four year Education Funding Agency contractors framework and numerous health and education contracts in Scotland and the Midlands.

Brokers expect the firm to punch robust earnings growth of 15% and 23% for the years concluding July 2014 and 2015 respectively, figures which result in PEG readouts of 1 and 0.5. These robust forecasts underpin sterling dividend yields of 3.8% and 4.7% for this year and next.

Low & Bonar

Performance materials specialist Low & Bonar (LSE: LWB) reported that activity had accelerated during the second half of fiscal 2013, pushing like-for-like sales 5% higher from the corresponding 2012 period.

Low & Bonar is a leader in building synthetic non-woven materials and textiles for a multitude of civil engineering, building and industrial uses. The company’s Yarns business — which makes grass yarns for artificial pitches and carpet-backing yarns — is witnessing improving conditions in Europe. Meanwhile, the recent acquisition of Slovakian high-strength geosynthetic goods manufacturer Texiplast to boost its civil engineering product suite is also performing well.

Forecasters expect earnings to nudge 1% higher for the year concluding November 2013 before thrusting 13% and 12% in 2014 and 2015 respectively. Projections for this year and next represent great value with a PEG rating of 0.9, while lively dividend yields of 3.7% and 4% should please income investors.

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> Royston does not own shares in any of the companies mentioned in this article.