Countryside Properties boosted by Berenberg initiation at 'buy'
(ShareCast News) - Countryside Properties got a boost on Tuesday as Berenberg initiated coverage of the stock at 'buy' with a 330p price target, highlighting several areas for growth and an undemanding valuation.
Berenberg said the company's Housebuilding division offers more and faster growth than many peers. As far as the Partnerships business is concerned, it argued there is a growing need for social housing and said the division is likely to be far less cyclical than "normal" housebuilding. Berenberg noted that Partnerships had a return on capital employed of 70% in 2016 and a sustainable ROCE of around 50%, around double that of the average housebuilder.
"We see sufficient barriers to entry to suggest these returns are sustainable. With 8,000 plots in its landbank, a further 6,000 on which it is the preferred bidder, and visibility on a further 35,000 plots to bid on, we expect our 2,197 completions for 2017E will be built upon in subsequent years. With net cash and a £300m bank facility to cover peak net debt of circa £130m, Countryside is well capitalised to fund its growth trajectory."
The bank also pointed out that management is in the process of reviewing its five-year targets and said it expects a big increase in ambition.
Finally, Berenberg said the stock's valuation is undemanding and trading at an unjustified discount given its returns, which are above the sector average. "We expect management to report new medium-term targets with H1 results on 17 May 2017, with both those and the reported results as potential catalysts for the share price."
At 1040 BST, the shares were up 4.1% to 289.40p.