Canaccord ups rating on Crest Nicholson to 'buy'

The housebuilder said on Wednesday that the Covid-19 pandemic had “significantly” impacted its first-half performance, with revenues down 52% and adjusted pre-tax profits tumbling 93%. The number of completed homes, forward sales and the open market average selling price all fell.

But in a note published the following day, Canaccord said: “While there remains material macro uncertainly, management hopefully provided profit guidance for the full year, which implies a sharp profit increase in the second half on that delivered for the first.

“Liquidity and the balance sheet look comfortable.”

It continued: “Management has also assumed that house prices fall by 7.5%, which results in an inventory impairment that arguably makes the net asset value estimate now more robust to macro risks.”

Canaccord also pointed to “operational efficiencies and other strategic initiatives, which should lead to a better quality business in the medium term”.

The bank conceded that macro and Covid-19 risks were likely to weigh on the share price in the near term. But it concluded: “the valuation combined with the asset write-down taken should provide a degree of extra valuation comfort. We nudge our price target down to 260p and upgrade to ‘buy’.”

Previously, Canaccord had a ‘hold’ recommendation and a price target of 205.0p on the stock.

As at 1215 BST, shares in Crest Nicholson were trading 3% higher at 211.0p.