RBC Capital upgrades Vistry to ‘sector perform’

"We have come to see and understand the Vistry model more clearly since the announcement of its FY2023 results," the bank said.

"The model is radically different, and we have concluded that the UK's biggest housebuilder should be valued on a different basis to that of its traditional peers.

"Viewing Vistry through a new lens leads us to increase our price target significantly to 1,400p from 825p and our rating from ‘underperform’ to ‘sector perform’."

RBC said it thought it understood the partnership model before, but it understands it "much better" now.

The bank said one of the main reservations it had was regarding the availability of large public sector sites available on a draw down basis. "We didn't think there were enough of them to deliver Vistry's target volumes," it said.

While it still does not believe there are enough large sites, RBC said it appreciates that the partnership model can also work on smaller sites "of which there is a plentiful supply".

"The key to success is putting the partners in place rather than the size if the site purchased," it said.

"A partnership model approach to buying land is very different to that of a traditional housebuilder, but by moving down the risk reward curve and trading margin to de-risk sales we believe that Vistry can compete on a level playing field, and the partners may sometimes tip the field in Vistry's favour."