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Brokers: Liberum cautious on house builders

Published: 09:23 16 Dec 2015 GMT

Bovis2

The recent talk has been of UK housing strength but broker Liberum is more cautious on the sector, as margin pressures threaten.

It repeats 'sells' on Barratt (LON:BDEV) and Persimmon (LON:PSN) and Taylor Wimpey (LON:TW.) as valuations are too optimistic to accommodate margin pressure.

"We turned more cautious on housebuilders in early November," said Charlie Campbell.

"We see the valuations of the three largest builders coming under pressure if gross margins peak in 2016 as selling price inflation cools but cost inflation does not," he adds.

"House prices are much more stretched than widely assumed as high loan to income levels are now watched by a vigilant and powerful regulator.

"Stricter controls on buy-to-let first and owner occupied lending could restrict mortgage availability, slowing selling price inflation."

It has a hold on Berkeley, Bovis and  Redrow and is a buyer just of Bellway and MJ Gleeson.

BT (LON:BT.) has incurred the wrath of Deutsche today, which has downgraded the shares to 'sell'. The price target is  430p.

Analyst Robert Grindle notes that the firm out-performed in 2015 benefitting from a "benign" market and high domestic exposure at a time of sterling's strength and management have also done a good job on costs, TV and maximising returns.

"We were not positive enough due to concerns over regulation (will Openreach be spun out?) and whether convergence wars once BT owns EE, will prove deflationary. The new year sees elevated risks as those questions are answered," he says.

The same broker is more upbeat on cruise liner operator Carnival (LON:CCL), which it rates as a 'buy'.

Deutsche forecasts fourth quarter EPS to improve 36% to C$0.37 (guidance $0.36 to $0.40) from c$0.27 in Q414 with improvement being driven by lower fuel costs and declining general costs.

Also in broker world today, mining giant Anglo American (LON:AAL) is downgraded to 'sell' from 'hold' by Societe Generale.

Elsewere, Amec Foster Wheeler is rated 'overweight' by Barclays, but has its target price downgraded to 620p from 1,000p.

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