Bovis Homes left with an 'add' rating by Numis after trading update

10th Nov 2016 10:18

(ShareCast News) - Numis reiterated an 'add' rating and a target price of 939p on Bovis Homes on Thursday after the housebuilder reported a full year trading update.The company said it expects to deliver record revenues in 2016 as the backdrop for UK housebuilding continues to be positive, with demand for new homes outpacing supply.Aside from the weeks immediately after the Brexit vote, sales in the year to date have followed a normal seasonal pattern and Bovis is on track to achieve over 5% growth in legal completion volume in the year. The average sales price for this year is expected to be around 10% ahead of 2015, driven by an improving mix and increased underlying market pricing."Bovis' update points to an in-line performance for 2016 and we maintain our estimates, which show circa 15% pre-tax profit growth for the year and a further improvement in return on capital employed," according to Numis analysts.However, the broker cut its earnings per share estimate of 2017 by 6% to reflect its forecast of slightly lower volume growth, due an expected fall in the number of year-end sales outlets. The new estimate still implies 7% EPS growth in 2017, boosted by 5% volume growth on better quality sales outlets with higher sales rates. "Despite the reduction in estimates we continue to think that Bovis' shares are materially too cheap, trading on 0.94x P/NTAV, 6.8x PE and a yield of 6.2% for 2017 (which is 2.4x covered) - particularly given the high value embedded within the landbank and the strong fundamentals of the new build housing market," Numis said.Bovis rose 3.10% to 1,379p at 1029 GMT.