Broker snap: Bovis Homes is the 'pick of the bunch', says Panmure

2nd Jan 2014 10:33

Panmure Gordon has named Bovis Homes as the "pick of the bunch" among UK housebuilders, saying that the stock remains cheap despite strong growth prospects.The broker said that the backdrop for the wider industry is "positive at an operating level" as that the UK housing market is in recovery mode.Helped by government stimulus measures and improving mortgage availability, Panmure said that all housebuilders are experiencing increasing demand, with rates of year-on-year improvement having significantly increased since the Spring Budget. House prices nationally have also firmed up and companies' margins are expanding at a healthy rate, it said.As for Bovis, analysts Mark Hughes and Rachael Applegate said the firm is performing "exceptionally well" with strong profit growth in 2013 and forward sales well ahead of last year."The company has also been very active in the land market, adding c4,000 plots in 2013. Deferred terms will aid return on capital employed (ROCE) expansion as these plots are converted into homes over time. "The company has net debt of £125m at present but this will fall to £30m by the year-end according to our model. We are comfortable with the strength of the balance sheet."Panmure retained a 'buy' rating and 900p target price for the stock, saying that its current low rating - trading at just 1.2 times net asset value - is "anomalous" given its "higher-than-average recovery-based growth".The stock was trading 0.25% higher at 795p by 10:47 on Thursday.BC