RBC Capital believes that a sale to rival Bellway PLC (LSE:BWY) offers a less risky and smoother path for investors in builder Crest Nicholson PLC (LSE:CRST) and suggests that if Bellway returns with a third offer, shareholders should seriously consider it.
This comes after Crest Nicholson rejected two takeover bids from Bellway, which offered significant premia over the current share price.
RBC has raised its price target for Crest Nicholson from 175 pence to 250 pence, reflecting the bid interest; however, its recommendation remains 'underperform'.
Crest Nicholson's shares have been trading at a significant discount to book value due to challenges in the housing market and operational difficulties within the company.
Here's what RBC is saying about Bellway
The recent bids from Bellway were rejected by Crest's board, who deemed them undervalued relative to the company's prospects.
RBC’s recommendation is underpinned by the belief that Crest Nicholson’s standalone prospects are uncertain, given its history of profit warnings and operational challenges.
The company's current CEO and CFO are relatively new to their roles, adding to the uncertainty. Despite these issues, RBC sees value in Crest Nicholson’s large land bank and believes a more experienced housebuilder like Bellway could stabilize the company and enhance shareholder returns.
In late morning trading, the stock was trading sideways at 249.4p.