Berenberg selects its top-picks in UK construction

24th Aug 2018 13:27

(Sharecast News) - Analysts at Berenberg sounded a positive note on several of the UK's main housebuilders, arguing that investors' concerns were overdone in several respects, including the sustainability of the dividend payouts from the sector, the impact declines in "average" house prices might have and buyer affordability.Nevertheless, stock selection in the space "matters" they stressed, pointing out how picking shares of the top-performer each year would transform £100.0 into £63,000.0 over the course of 17 years, while doing the opposite would see the value of the initial investment dwindle to just £2.0."In our view, share price performance continues to diverge from fundamentals, with investors' memories of past performance shaping their future expectations," analysts Sam Cullen, Lushanthan Mahendrarajah, Anthony Plom and Omar Ismail said in a research note sent to clients.Regarding companies' dividends, they said that at current levels, payouts could be maintained even should volumes fall 20% and house prices fall 10%.As for the "average house price", it tended to be very influenced by movements in London prices, which acounted for 21% of the national price index, they said.And interest rates were a "non-issue"."Mortgage repayments are at near record lows when compared to incomes, deposits (available through Help to Buy) are the barrier to home ownership. Mortgage rates can almost double before long run levels of affordability are breached," they explained.Taking all of the above into account, they retained buy-rated Barratt Developments (target price: 670.0p), Taylor Wimpey (target price: 210.0p), Countryside (target price: 430.0p) and Bellway (target price: 3,760.0p) as their 'top picks'.