Broker snap: Berkeley in different class, says Citi

7th Dec 2009 13:03

The continued absence of land value write-downs at Berkeley Group underlines the reputation of the housebuilder as a shrewd purchaser of land, Citigroup believes.The company announced a slide in interim profits to £52m from £80m a year earlier, with the average selling price tumbling to £299,000 from £395,000 a year ago. Nevertheless, Citi believes the 'interim numbers show resilience,' with margins only modestly lower at 17.4% from 17.8% last year.The group has around £345m of net cash, up from £285m a year earlier, and has also signed up a new £300m banking facility, 'giving the group significant spending capabilities' to add to its impressive land bank, which should satisfy demand for 'well over 10 years', Citi reckons.'Berkeley continues to focus on the long term evolution of the business. As such it is a less geared play to short-term housing recovery than others. Despite that it is a very well placed housebuilder, which has a large amount of hidden value in its significant land bank, in our view,' Citi analyst Clyde Lewis concludes.The broker has a target price of 1225p for the stock.