6th May 2014 12:45
LONDON (Alliance News) - Persimmon leads the UK housebuilders higher Tuesday, up 3.5% after Barclays published a positive report on the sector that was particularly flattering for the York-based company.
Of all the housebuilders, Persimmon has arguably been the largest beneficiary of the Help to Buy scheme, and is likely to continue to be so, says Barclays homebuilding analyst Jon Bell. The company doesn't operate in London, where take up of Help to Buy is low, it tends to build family style housing, which reduces exposure to buy-to-let investors who are not eligible for the scheme, and its houses are relatively modestly priced, which aligns it with the scheme, says Bell.
The recent four-year extension of the Help to Buy scheme is very supportive of the housebuilders, and particularly Persimmon, says Bell. Although there is risk that a new government could change or cancel the scheme, Barclays believes it could become a permanent fixture of the housing market.
The most recent housing surveys have shown that house prices are rising all over the UK and not just in London. As a player with little or no presence in London, Persimmon is well placed to enjoy the benefits of improvements that are now spreading to regional housing markets.
Furthermore, Persimmon's land bank, notably it's holdings of strategic land, is very strong, says Bell. The company provides its strategic land holding as an acreage, so, making an assumption of 8 plots per acre, Barclays calculates that Persimmon has more strategic land plots than any other UK housebuilder.
Barclays has increased its 2014 pretax profit forecast to GBP410.5 million, from GBP399.4 million, and increased its 2015 forecast to GBP530.2 million from GBP489.2 million. It has introduced new forecasts for 2016 and 2017 of GBP608.0 million and GBP629.2 million. The bank also expects that Persimmon will bring forward its cash return programme and pay a dividend of 110 pence per share in December 2015.
This leads Barclays to raise its price target by 15% to 1,540 pence, from 1,333.6 pence, while reiterating an Equalweight rating on the stock and a Positive rating on the industry. Persimmon leads the gainers in the FTSE 100, up 47 pence, or 3.5% at 1,374p.
Barclays also raised its price target on fellow FTSE 100 housebuilder Barrat Developments by 6.4% to 501.20. Barratt shares are up 1.5% at 380.70 pence.
By Jon Darby; [email protected]; @jondarby100
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