Peel Hunt upgrades Bellway, downgrades Savills

Peel Hunt upgraded Bellway to 'add' from 'hold' and went the other way on Savills as it took a look at UK housebuilders and estate agents.

Peel said it remains positive about the outlook for London-listed housebuilders and their share prices. As far as estate agents are concerned, it said the traditional players are faced with low market volumes and a structural shift towards different formats.

The brokerage lifted its price target on Bellway to 3,145p from 2.925p, noting the stock has delivered a pre-tax profit compound annual growth rate of around 53% over the last three years, compared to a sector average of 33%.

"Looking ahead, with a steady economic backdrop, new outlet openings should drive volumes and profits higher again," it said, adding that it forecasts average net asset value growth and a dividend yield of around 19% over the next two years.

Peel said Savills' results for 2016 were better than expected, aided in part by FX and better results in Asia and the UK than anticipated. The brokerage upped its price target on the stock to 910p from 750p to reflect higher forecasts and the rolling forward of its multiples to June 2018.

However, it said the shares don't offer much value after a strong run in the last few months, hence the downgrade.

Peel Hunt said buy-rated Berkeley Group was one of its top picks. Concerns about London will probably limit the stock's short-term performance, but the brokerage said it remains confident there is "great" long-term value in the current share price.

More broadly, Peel said investors should watch out for the election, which will bring with it new manifestos and therefore promises about housing supply and other issues from the mainstream parties.

"While manifestos promises are frequently ignored or diluted, they should give more evidence of the direction of travel on political attitudes towards the housing market."

At 1050 BST, Bellway shares were up 0.9% to 2,822p while Savills was down 1.7% to 912p.