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Liberum bullish on the builders; Bellway and Taylor Wimpey to picks

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The City broker Liberum has put together a bumper 25 pages of research on the house builders in which it gives a bullish assessment of the sector.

Its top picks are Bellway (LON:BWY) and Taylor Wimpey (LON:TW). The one casualty was Barratt Developments (LON:BDEV), which is lopped back to 'hold' from 'buy'.

Analyst Charlie Campbell says while investors are fretting over a hike to interest rates, there is little reason to worry. 

Moreover, he reckons even without a re-rating the builders could provide 16% total shareholder return.

“The sector has come under pressure as investors have fretted about mortgage availability, mortgage regulation and base rates,” Campbell told clients. 

“We believe that much of these fears are overdone, and there is a strong investment case, but we have to concede that valuations are unlikely to break out of long established ranges while interest rates are rising. 

“But, we see good upside in the sector even in the absence of a re-rating, as shares are now likely to follow net asset value growth over the next year or so, and growing distributions will help drive outperformance.”


Quick facts: Bellway PLC

Price: 2092 GBX

LSE:BWY
Market: LSE
Market Cap: £2.58 billion
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