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Redrow ranks highest as UBS says housebuilders offer "favourable risk/reward" from coronavirus

Among stock rated ‘buy’, Redrow was ranked top in terms of offering the most upside from its current share price

Redrow PLC -

The housebuilding sector offers “favourable” risk-reward, UBS said on Friday, even as it cut its target prices for the sector by 25-58%.

While there is “very limited” visibility on profits in the short-term, depending on the duration of the coronavirus lockdown and how the economy reacts, sector valuations has de-rated to a level equal to tangible net assets compared to around 1.9 times before the Covid-19 outbreak. 

READ: Redrow decides not to keep sites open after barrage of criticism

With balance sheets looking strong, to varying degrees, and “even with no revenues for three months”, UBS analysts reckon the sector has sufficient liquidity.

Among stock rated ‘buy’, Redrow (LON:RDW) was ranked top in terms of offering the most upside from its current share price, as the analysts cut the price target from 1,040p to 690p, versus a share price that closes overnight at 402p. Including its promised dividends it offered a total shareholder return of 72%.

Ranked second and third in terms of upside, Bellway's (LON:BWY) target was cut from 4,620p to 3,190p versus its last closing price at 2,202p; while Berkeley Group (LON:BKG) was cut from 6,275p to 4,700p versus a close price of 3,695p.

Next in the ‘buy’ came Barratt Developments (LON:BDEV) as it was cut from 880p to 625p versus a closing price of 478p; then Taylor Wimpey (LON”TW.) was cut from 230p to 165p versus the closing price of 132p.

Persimmon (LON:PSN) was cut from 3,250p to 2,400p, while its shares closed the previous day at 2,079p.

Vistry Group (LON:VTY) and Crest Nicholson (LON:CRST), which both remained at ‘neutral’, saw 50% cuts to their price targets, to 690p and 220p respectively, both offering single-digit upside.

McCarthy & Stone (LON:MCS) remained at ‘sell’ and with the target slashed to 55p from 132p.

Quick facts: Redrow PLC

Price: 468.6 GBX

LSE:RDW
Market: LSE
Market Cap: £1.65 billion
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