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Berkeley and Crest Nicholson no longer 'sells' for Deutsche Bank

Analysts kept their ‘buy’ ratings for Barratt Developments, Bellway, Countryside Properties, McCarthy & Stone, Persimmon, Redrow and Taylor Wimpey

Bellway PLC -
Housebuilding has virtually stopped but the housing market is at a standstill

“Forget earnings downgrades, ignore sensitivity analysis, none of it matters,” said analysts at Deutsche Bank, though they removed their 'sell' recommendations for Berkeley Group PLC (LON:BLG) and Crest Nicholson PLC (LON:CRST).

Although the housing market has “stopped in its tracks”, the bank's analysts reminded clients, they upgraded both FTSE 100 giant Berkeley and mid-cap Crest Nicholson to new ‘hold’ ratings.

Berkeley’s share price target was kept at 3,990p, while for Crest it was cut to 202p from 368p.

Late last month Berkeley warned that profits would be hit as it is starting to shut down more — but not all — of its building sites as the coronavirus epidemic hits its supply chain.

Consider Persimmon PLC (LON:PSN), the analysts said, noting that they and many other view this sector bellwether as better financed than most and prior to the pandemic was on track to deliver pre-tax profit of circa £1bn this year. 

“If it doesn't sell a single additional unit between now and year end, it might break even,” the analysts said, dramatically.

But they added: “The truth (we hope) lies somewhere in between and, in the absence of clarity on the duration of all of this, we cannot forecast earnings accurately.”

Furthermore, ‘buy’ ratings were maintained for Persimmon, Barratt Developments (LON:BDEV), Bellway (LON:BWY), Countryside Properties (LON:CWD), McCarthy & Stone (LON:MCS), Redrow (LON:RDW) and Taylor Wimpey (LON:TW.).

Vistry Group (LON:VTY) was kept at ‘hold’.

In recent weeks, various analysts have been wrestling with how best to value the sector, with JPMorgan Cazenove calculating a "conservative" 30% decline in housing completions for 2020, leading to an upgrade for Berkeley to ‘overweight’ but downgrades for Redrow and Taylor Wimpey to ‘neutral’.

UBS late last month cut target prices for the sector by 25-58%, with “very limited” visibility on profits depending on the duration of the lockdown and how the economy reacts.

Quick facts: Berkeley Group

Price: 4159 GBX

LSE:BKG
Market: LSE
Market Cap: £5.23 billion
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