Broker snap: Bovis shares too high

14th Jan 2011 12:46

While Bovis Homes has beaten consensus for 2010, broker Peel Hunt says that "almost anything is better" in the housebuilding sector as the shares are too expensive in comparison to its peers.On Friday, the group stated that margins will be at least 7%, more than half a percentage point better than previous guidance, meaning an upgrade in 2010 pre-tax profit from £16m to £18m for the broker. Earnings per share will be increased from 8.4p to 9.5p. However, Bovis's "relative valuation within the sector remains a problem," says analyst Robin Hardy, as its return on capital employed (ROCE) looking forwards to 2012 is poor at between 4% and 5%."By 2012 we see Persimmon making close to 8-9% ROCE," adds Hardy, reiterating that "everything else in the sector is better value."The broker confirms a 'sell' rating and places the target price of 200p under review.