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Canaccord raises price target on Barratt following recent 'good progress'
5th Sep 2019 11:44
(Sharecast News) - Analysts at Canaccord Genuity upped their price target on British residential property development company Barratt Developments from 620.0p to 660.0p on Thursday, stating the group's recent "good progress" left it offering "good value in absolute terms".
The Canadian broker said Barratt was "delivering well", with management doing "a good job" of structurally improving margins as well as reducing its use of land creditors as the land market continues to support target margins.
However, its analysts said the key issue facing Barratt was whether or not sales rates would continue to hold up against the current macro and political backdrop.
Assuming that sales rates did so, Canaccord said Barratt looked "well placed" to continue to deliver volume growth of around 3.0-5.0% and had the capacity to deliver 20,000 completions over time.
While net cash was now expected to be "a bit lower than previously expected" in 2020, lower levels of land creditors and land investment looked set to continue to support growth.
"Valuation now looks less compelling relative to the sector but we continue to see attractive absolute value supported by a good dividend yield and balance sheet," said Canaccord, which stood by its 'buy' rating on the group.
Canaccord also believed the group had "clear medium-term targets" with its analysts confident that it was "well placed" to meet them.
"While the shares trade more in line with the sector average valuation, we believe they continue to offer good value in absolute terms given the expected returns, strong balance sheet and dividends," concluded the analysts.
The Canadian broker said Barratt was "delivering well", with management doing "a good job" of structurally improving margins as well as reducing its use of land creditors as the land market continues to support target margins.
However, its analysts said the key issue facing Barratt was whether or not sales rates would continue to hold up against the current macro and political backdrop.
Assuming that sales rates did so, Canaccord said Barratt looked "well placed" to continue to deliver volume growth of around 3.0-5.0% and had the capacity to deliver 20,000 completions over time.
While net cash was now expected to be "a bit lower than previously expected" in 2020, lower levels of land creditors and land investment looked set to continue to support growth.
"Valuation now looks less compelling relative to the sector but we continue to see attractive absolute value supported by a good dividend yield and balance sheet," said Canaccord, which stood by its 'buy' rating on the group.
Canaccord also believed the group had "clear medium-term targets" with its analysts confident that it was "well placed" to meet them.
"While the shares trade more in line with the sector average valuation, we believe they continue to offer good value in absolute terms given the expected returns, strong balance sheet and dividends," concluded the analysts.