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Berenberg praises UK construction firms following strong start to the year

By Iain Gilbert

Date: Wednesday 06 Mar 2019

Berenberg praises UK construction firms following strong start to the year

(Sharecast News) - Analysts at Berenberg took a fresh look at the British construction sector on Wednesday, reiterating its positive stance on UK housebuilders after a strong start to the year.
Berenberg said underlying positive trends and strong sales rates have caused consensus estimates to tick up around 3%, while lending trends remained supportive and margins were being largely maintained.

The German bank also stated the sector's cash story continued to "roll on" and said it expects the sector to return 22% of its market capitalisation over the next three years via dividends and buybacks.

In terms of individual companies, Berenberg said it preference list "remains unchanged", even after the strong start to 2019.

The broker said it continues to prefer exposure to those companies with flexibility around the margin, such as Barratt Developments and Bovis, exemplary track records and compelling valuations, like Bellway, and those like Taylor Wimpey, and MJ Gleeson, which have the ability to materially increase volumes on a multi-year view.

"We would be most wary of exposure to those companies that are overexposed to a secondary market that is structurally challenged (Crest Nicholson, and McCarthy & Stone)," said Berenberg.

Berenberg reiterated its 'buy' rating on Taylor Wimpey and Bovis but dropped its price target on the former to 200p from 210p.

As far as Persimmon was concerned, Berenberg stood by its 'hold' rating but opted to cut its target price to 2,630p from 2,670p.

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