Broker tips: Vistry, Focusrite

19th Mar 2024 15:24

(Sharecast News) - RBC Capital Markets upgraded its stance on Vistry on Tuesday as it took a fresh look at the house housebuilder following its full-year results.

"We have come to see and understand the Vistry model more clearly since the announcement of its FY2023 results," the bank said. "The model is radically different, and we have concluded that the UK's biggest housebuilder should be valued on a different basis to that of its traditional peers.

The Canadian bank stated that after viewing Vistry "through a new lens", it had chosen to increase its price target "significantly" to 1,400.0p from 825.0p and its rating from 'underperform' to 'sector perform'.

RBC said it thought it understood the partnership model before, but it understands it "much better" now, stating that one of the main reservations it had was regarding the availability of large public sector sites available on a draw-down basis.

While it still does not believe there are enough large sites, RBC said it appreciates that the partnership model can also work on smaller sites "of which there is a plentiful supply".

"The key to success is putting the partners in place rather than the size if the site purchased," it said. "A partnership model approach to buying land is very different to that of a traditional housebuilder, but by moving down the risk reward curve and trading margin to de-risk sales we believe that Vistry can compete on a level playing field, and the partners may sometimes tip the field in Vistry's favour."

Analysts at Berenberg slashed their target price on audio products manufacturer Focusrite from 700.0p to 410.0p on Tuesday following the group's profit warning a day earlier.

Focusrite stated on Monday that it expected revenues to no be less than £1550m and adjusted underlying earnings to be between £27.0m and £30.0m for the full year. Consensus expectations were for revenues of £182.0m and adjusted EBITDA of £38.0m.

The business noted continued weakness in content creation, particularly in its Asian markets, with no improvement from the region factored into its new guidance. The primary driver of this weakness was poor end-market demand, with the cost-of-living pressures leading customers to buy cheaper, previous-generation content-creation kits. Weak demand also led the channel to purchase less inventory, which in turn has affected Focusrite.

"We update our forecasts to reflect the updated guidance and lower our price target to 410.0p, as we update our DCF assumptions," said Berenberg.

The German bank added that Focusrite currently trades on 12.6x full-year price-to-earnings ratio.