MARKET REPORT: Housebuilders hit record highs as HSBC tips sector

A string of housebuilders hit record highs after HSBC tipped the sector as the latest winner from Boris Johnson’s landslide election victory.

In a bullish note, analysts upgraded profit and dividend forecasts as it said the Tory party’s 80-seat majority has ‘brought the prospect of a final settlement of Brexit closer and unleashed pent-up demand in housing’.

This is especially true, HSBC said, in the South East, where Britain’s major builders have a foothold and where it reckons prices will pick up most sharply after a drop in autumn.

Builders tipped: HSBC analysts said the Tory party’s 80-seat majority has ‘brought the prospect of a final settlement of Brexit closer and unleashed pent-up demand in housing’

This is added to an expected rush to take advantage of the Government’s Help to Buy scheme, which will shut to all but first-time buyers from April 2021.

Berkeley Group, Persimmon, Barratt Developments, Bellway and Redrow all closed at record highs. 

HSBC said Barratt and Redrow benefit from having a weighting to southern England. And it pointed to Bellway’s conservative strategy of disciplined land-buying – bumping its target price from 4300p to 5470p – and Crest Nicholson’s upcoming turnaround as reasons to be buoyant about the company, which is one of their top picks. 

Stock Watch – Distil  

Rum and vodka maker Distil has signed a deal to make new drinks with honey and gin maker British Honey Co (BHC).

Each will put £30,000 into the joint venture and will trade other skills in a wider partnership. 

AIM-listed Distil will be able to use BHC’s distillery and Distil will help with BHC marketing its own brands.

Distil warned investors it is likely to rack up unbudgeted costs and these could mean profits come in below expectations – but shares still rose 3 per cent, or 0.03p, to 0.85p.  

Crest rose 1.6 per cent, or 5.9p, to 519p while Persimmon was up 1.7 per cent, or 55p, to 3298p.

HSBC also moved Berkeley Group up from ‘hold’ to ‘buy’, as it believes the firm, which climbed 2.1 per cent, or 112p, to 5474p, will see the smallest hit once the Help to Buy changes come into force.

The upgrade means HSBC now has ‘buy’ ratings on all nine listed housebuilders. Shares in peer Taylor Wimpey also rose – by 1.9 per cent, or 4.5p, to 236.2p.

This nudged the FTSE 100 up 0.9 per cent, or 75.01 points, to close at 7457.02, though the blue-chip index also got a boost from a slowing in the rate of new cases of the coronavirus. 

But despite the slowdown, Berenberg analysts are not convinced the cruise industry will recover soon.

The German investment bank kept a ‘sell’ rating on Carnival as it said a likely fall in future bookings will add to the initial damage of cancellations and compensations, meaning cruise companies may need to offer a £39 discount per passenger to fill ships.

Carnival, whose Diamond Princess ship had the highest concentration of coronavirus cases outside of China, rose by 1.1 per cent, or 33p, to 3116p.

The FTSE 250 climbed 0.6 per cent, or 172.40 points, to 21,850.86, helped by a 12.2 per cent rise in Hochschild Mining, which added 20.7p to close at 181.2p. 

The gold and silver miner saw its 2019 profits almost double to £59million as better prices for precious metals – pushed higher by trade tensions between the US and China – combined with lower costs.

Tech group Micro Focus launched a £1.1billion debt refinancing soon after chairman Kevin Loosemore announced he would leave, and it kicked off a strategic review after revenues plunged almost 30 per cent last year. 

It finished 1.9 per cent, or 14.9p, higher at 801.2p.

Royal Mail was the victim of a scathing broker update, falling 2.9 per cent, or 5.2p, to 174.2p as Liberum kept a ‘sell’ rating on its stock and slashed the price target to 120p form 175p. 

Analysts claimed its strategy is ‘undeliverable’, and that managers openly questioning whether it will meet its 2024 targets is ‘hardly encouraging’.

And small-cap group Avon Rubber, which makes equipment such as gas masks and dairy tubes that milk cows, rose 0.2 per cent, or 5p, to 275p as it clinched a new chairman, Bruce Thompson, and was tipped to join the FTSE 250 in the next reshuffle in March.



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