UBS downgrades Crest Nicholson to ‘sell’

The bank said that following a strong run in the shares - up 18% above pre-mini budget levels versus the sector up 8% to 25% - it sees an unfavourable risk/reward.

"In a scenario where house prices materially decline Crest Nicholson appears the most at risk of land impairments given its lower margins (15% versus sector circa 20%)," UBS said.

"We also see execution risk in the geographic rollout: (1) capital deployment in new markets, (2) market timing and (3) increasing overheads (guided +10% for FY23)."

The bank said that over the medium term, Crest's divisions are in areas where planning restrictions appear the most acute, which could constrain volume recovery and/or reduce intake margins on land approvals.

It noted the shares trade at around 30% discount to TNAV (CY23E), which initially appears cheap, but relative to SMID cap housebuilders does not reflect the higher risk.

UBS kept its 210p price target on the stock.