Countryside Properties trading at unjustified discount, Berenberg says, starts at buy

The key to its investment thesis was that the homebuilder already had the landbank, pipeline and capital in place for a larger business.

Its partnership arm, which worked with local authorities to regenerate public land, was set to benefit from the growing need for social housing.

It was also likely to be "far less cyclical" than 'normal' housebuilding, Berenberg said, sporting a "sustainable" return on capital employed of 50%.

ROCE in Partnerships was 70% in 2016.

"Management is currently reviewing its five-year targets, and we expect a significant increase in ambition."

Countryside also enjoyed a comfortable funding position, with net cash and a £300m bank facility with which to cover peak net debt of about £130m and its growth trajectory.

Although the outfit was moving down the price curve, expectations for strong sales meant management's target for a 200 basis point increase in its gross profit margins to 24%.

Yet despite its above-average sector returns, the shares were trading at a 20% discount in terms of their relative price-to-earnings multiple-

Berenberg set an initial target price of 330.0p on the shares.

"We think that is unjustified and expect the shares to perform as the greater profits are reported through 2017. 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."