UBS reiterates 'buy' on Berkeley, lifts price target

UBS said the size and scale of Berkeley's land bank is its key differentiator and its analysis suggests that not only can it beat its current six-year target to FY25, but that for the following six years to April 2031, from its already owned and controlled land bank, the group can increase its pre-tax profit target to around £650m to £700m a year.

"Trading at 1.5x 2021 cal P/NTAV Berkeley's historic premium to the sector is all but eroded," said UBS. "However while EBIT growth will likely lag housebuilder peers near term, already owning the land to deliver profit before tax up to 15% higher than consensus in FY24, and then to continue at this level until FY31, there is considerable deep value.

"Cap this with a yield of 5% per annum and scope for a series of one-offs to drive meaningful upside, Berkeley is worthwhile considering again."

UBS said that with nearly three times the length of land bank and three times the build work in progress of others, using a liquidation value to try to capture the value of balance sheet strength, offers upside of more than 7,000p.