Canaccord Genuity ups MJ Gleeson to 'buy'

Analysts at Canaccord Genuity upped their recommendation on low-cost housebuilder MJ Gleeson from 'hold' to 'buy' on Tuesday, stating that growth had been "interrupted but not prevented".

Canaccord noted that MJ Gleeson's profits were "severely hit" in 2020 as lockdown essentially stopped activity for the group in its "important" final quarter.

However, the Canadian bank highlighted that MJ Gleeson had recently boosted its balance sheet with an equity raise and had significantly invested in site infrastructure as continued to focus on delivering completions from its record order book amid "strong" sales rates.

"It was very positive to see management reaffirm its full-year 2022 completion target of 2,000 homes and we would also expect to see good profit recovery in the strategic land division as housebuilders start to invest in consented land again," said the analysts.

Canaccord also stated that MJ Gleeson served "an attractive segment of the affordable market" and with around 84% of the firm's buyers being first-time buyers, the analysts believe the company was "well placed" to continue to benefit from Help to Buy.

"The balance sheet is in good shape to support the targeted growth and while the priority is clearly investing for growth, we also expect dividends to gradually resume in the current financial year," concluded Canaccord, which also slightly raised its target price on the stock to 700.0p from 690.0p.