Analysts try to see positives after Crest Nic warning

17th Oct 2018 13:32

(Sharecast News) - After housebuilder Crest Nicholson issued another profit warning on Wednesday, analysts were disappointed but tried to look for the positives.Crest Nicholson said PBT for 2018 will fall to £170-190m, around 12% short of City expectations, as the housing market remained tough in London and for houses at higher price points in the South East, with none of the hoped-for uptick in the traditional autumn selling season.The company's finance director has departed and former chief executive Steve Stone, who had moved up to chairman, is returning to an operational role.Stone will help implement a new strategy of forsaking growth to prioritise cash returns and returns to shareholders. The current dividend is unchanged for this year at 32p, assuming profits don't decline further, after which the board is looking to generate cash and maximise shareholder returns.Broker Shore Capital said the issue is the same as in previous warnings, namely a very tough market at higher price points, especially beyond the limits of help to buy, and problems completing sales where buyers also need to sell a house in the second hand market."The problem is really one of affordability although the industry is keen to blame Brexit," said ShoreCap's Robin Hardy, noting that Bellway earlier in the week acknowledged that Brexit actually barely registers outside London, "so we still believe that that is not the core of the issue for the house builders but a raw lack of affordability".JPMorgan Cazenove said: "While there might be scope to be more positive on the medium term strategy today, the material profit downgrade should still be viewed negatively and we still see risk that Crest's core markets deteriorate further."Peel Hunt based its revised target price of 330p on forecast tangible NAV for FY18. "Bid speculation may increase if the shares fall significantly below this level, as we saw with Bovis in 2017. However, we also believe that the ongoing trading backdrop, potential for some modest land write downs and ongoing operational issues will keep a lid on the share price. Hold."UBS also saw "downside protection" from valuation, with the shares trading slightly below book value and 10% dividend yield.House broker Liberum cut EPS estimates by 14-22% across 2018-2020, pitching its 2018 estimate towards the lower end of the range at £175m announced and taking management's guidance literally that it is aiming to maintain PBT in 2019.