Persimmon, Redrow, Berkeley to remain solid despite uncertainty, says UBS
The Swiss bank also selected Berkeley Group Holdings PLC (LON:BKG) and Redrow plc (LON:RDW) as "top picks" in the sector, while seeing the most risky investment being McCarthy & Stone PLC (LON:MCS), recommended as a sell.
"Despite Brexit fatigue, buoyancy has not returned to the market with most leading indicators staying soft," analysts said in the note to clients, with the short-term outlook "still looks blurry" amid the political uncertainty.
Most builders covered recently cited continued growth in reservations and order books, despite the weaker backdrop, as fundamentals for the sector remain supportive, including from the government, though "somewhat spoiled" by rising margin pressure from cost inflation.
While stock market pricing point to an immediate decline in return on capital employed (ROCE) — the indication of how well a company is generating profits from its spending — from 26% in 2018 to 26% next year, UBS analysts forecast ROCE will only see a gradual decline to 18% by 2024 when the government's Help to Buy scheme expires.
They noted the sectors total shareholder return growing 40% in the year to date and that housebuilders are "well-positioned" against political headwinds, both on the demand and supply sides, with buying intentions remaRead More – Source