JPMorgan Cazenove turned positive on UK housebuilders Redrow plc (LON:RDW) and Countryside Properties PLC (LON:CSP) in a sector review today, but made negatives moves on Bovis Homes PLC (LON:BVS) and Crest Nicholson PLC (LON:CRST).
In the note to clients, the US bank’s analysts upgraded their ratings for both Redrow and Countryside to ‘overweight’ from ‘neutral’, but reversed their stance on Bovis and Crest the other way, down to ‘neutral’.
The analysts said: “The UK housebuilders have performed well year to date, up 18% (+14% vs. ASX), supported by a combination of earnings guidance upgrades, confident commentary from companies, improved housing market data, and a benign white paper.”
They added: “While stocks are back to pre-Brexit highs, we believe it’s worth remembering that implies a 10% derating vs. 12 months ago to just 8x 2018E P/E, and we are still forecasting an average dividend yield of 6%.”
The analysts pointed out that relative performance has leads it to revisit its order of preference in the sector, hence the changes in ratings for individual stocks.
They said FTSE 100-listed Persimmon PLC (LON:PSN) and Berkeley Group PLC (LON:BKG) remain their top sector picks, while among the small caps, they favour Bellway PLC (LON:BWY) and Redrow.
In reaction to the upgrade, Redrow shares rose 2.4%, or 12.5p to 526.0p, while Countryside gained 3.6%, or 8.8p at 253.2p.
The opposite moves saw Crest lose 0.6%, or 3p at 545.5p, while Bovis shares shed 1.6%, or 14p at 878p.
Bovis back-tracks …
Bovis was also hit by some profit-taking and cautious broker comment following a boost yesterday from news that it had appointed a new chief executive as merger proposals were withdraw by Galliford Try (LON:GFRD).
Barclays Capital reinstated its rating on Bovis at ‘underweight’ having had it under review as the market awaited news on bid talks with Galliford after the straight rejection of another offer by Redrow in February.
READ: Bovis appoints new boss …
Barclays analysts said: “Bovis is no longer in bid talks, having rejected Galliford Try's merger proposal, and has appointed a new Chief Executive.
“Though the prospect of radical change is welcome, we reinstate our Underweight rating, believing any turnaround is likely to take considerable time.”