Housebuilders were in demand today after Deutsche Bank said it saw “appealing value” in the sector, although Bovis Homes PLC (LON:BVS) missed out as the broker cut its rating.
In a note to clients, Deutsche Bank analysts, said: “While investor appetite for UK focused stocks remains more moderated reflecting Brexit risk, we see dividend yield as difficult to ignore and believe trading updates should continue to reassure on strong cash flow generation”.
They added: “With both the UK economy and housing market appearing to largely shrug off the impact of the Brexit vote, we have adjusted our assumptions for the UK housebuilding sector for 2017”.
The analysts said, after a tumultuous 2016 for the housebuilders, they have hiked their price targets across the board, which now “suggest close to 30% upside across the sector as a whole.”
They reiterated a positive stance on the sector and maintained ‘buy’ ratings on Taylor Wimpey PLC (LON:TW.), which is its top sector pick, as well as Barratt Developments PLC (LON:BDEV) and Berkeley Group PLC (LON:BKG).
The analysts also added retirement homes builder McCarthy & Stone PLC (LON:MCS) to that list, upgrading their recommendation to ‘buy’ from ‘hold’.
In reaction. McCarty & Stone shares were up over 3%, or 5.3p to 164.3p in early morning trading.
Bovis blighted ...
But they downgraded their stance on Bovis to ‘hold’ from ‘buy’ reflecting “continued operational stutters which have impacted confidence in forecasts”.
Bovis shares on the FTSE 250 index were down almost 4.5%, or 36.5p at 784.0p.
Analysts at Jefferies International also downgraded Bovis Homes today, cutting their rating to 'hold' from 'buy' as well and lowering their share price target to 886p from 1,110p.
The broker lowered its recommendation after the company's weaker than expected unscheduled trading update last week, cutting its profit before tax estimates but leaving its dividend expectations unchanged.
Other trading updates are scheduled from the sector over the next few week’s, kicking off with Persimmon PLC (LON:PSN) tomorrow.
Persimmon shares topped the FTSE 100 leader board this morning, up 1.25%, or 22p at 1,782p.
The housebuilding sector also got a boost today from a survey showing UK construction activity expanded at the quickest pace in nine months in December, driven by an accelerated upturn in new work.
The latest Markit/CIPS Construction Purchasing Managers' Index rose to 54.2 in December, up from 52.8 in November.
Among the three broad categories construction activity, the report showed residential building activity remained the best performing sub-category in December.
-- Adds Jefferies' Bovis downgrade, construction PMI report --