Since the start of 2018, the stock has underperformed, both in absolute terms – the stock is down 11% over the period – and relative to the sector, and Deutsche Bank (DB) thinks this is because of a “perceived read-across from peer issues on London/South, plus a change in management”.
DB would argue that the change in chief executive was on the cards and that there is no change in the credibility of the management team.
Meanwhile, it thinks concerns about the house-builder’s exposure to the cooling housing market in London and the south-east are overdone.
“While group revenue from London is ahead of peers, Bellway’s private average selling price remains below the sector average and its strong and increasing focus on build efficiencies should provide support to margins,” DB predicted.
The bank has upgraded its recommendation from ‘hold’ to ‘buy’ and bumped up the price target from 3,716p to 3,745p.
The bank also amended its price targets for a number of stocks in the house-building sector:
- Barratt Developments – 794p (from 541.4p);
- Berkeley Group – 4,014p (from 3,674p);
- Crest Nicholson – 524p (from 384.4p);
- McCarthy & Stone – 165p (from 110p);
- Persimmon – 3,093p (from 2,469p);
- Redrow – 672p (from 622p);
- Taylor Wimpey – 244p (from 168.65p)
Bellway’s shares currently trade at 2,941p, up 51p on the day.