Countryside is star buy for Jefferies in upbeat housebuilders report

Jefferies rated six British builders ‘buy’ and five ‘hold’ with no ‘sell’ ratings. As well as Countryside, analyst Glynis Johnson and her team recommended buying Barratt Developments, Bellway, McCarthy & Stone, Taylor Wimpey and Watkin Jones.

“We initiate with a positive stance on UK housebuilders, and our key pick in the sub-sector is Countryside,” Johnson wrote in a report.

Countryside’s share price has outperformed peers since its listing but there is more good news to come, the analysts said.

The company’s partnership business, which works with local authorities or housing associations to build affordable homes, is its best performing division and is undervalued by the market, they said. Countryside could decide to sell or split off its housebuilding business, which shareholders effectively get for free at the company’s current valuation, they added.

“We believe this partnership business remains underestimated both in terms of its less cyclical customer demand profile, growth potential and ROCE (return on capital) contribution,” Johnson wrote.

Jefferies gave ‘hold’ ratings to Berkeley Group, Bovis, Crest Nicholson, Persimmon and Redrow.

Among building distributors, Ferguson is the top pick at ‘buy’ with SIG and Travis Perkins rated ‘hold’. Contractors Keller and Morgan Sindall are rated ‘buy’ and Kier is a ‘hold’.

Investors should stick with shares of estate agents Countrywide and LSL, both rated ‘hold’, the analysts said.