Broker snap: Bovis virtually dormant

10th Jul 2009 12:50

Bovis Homes has dumped its dividend payment but on the bright side "it now looks certain to end the year with net cash", broker KBC Peel Hunt observes.The company is "benefiting from the near-100% cash conversion selling from stock," the broker said, and expects this to continue through the second half of the year. However, the group, which has not been active in buying up land "for the better part of four years" and which has cut down dramatically on building activity will have to ramp up activity at some point."Being virtually dormant on building activity does mean that a major swing back into active building will be needed fairly soon. This will require finesse not to overbuild or misread the market conditions. Bovis does not have the best record on this, and the previous phase of development led to this high stock position," KBC argues.In the meantime, the group's current trading does look better than its competitors, "but remember that Bovis was really struggling to sell last year, which resulted in the high stock position," KBC analyst Robin Hardy said. "Therefore, Bovis might appear to be trading materially better than its peers but while H1 has been good it has had the major advantage of selling almost entirely from finished stock," Hardy adds.The broker is remaining on the sidelines while it awaits Bovis's next move, and has a "hold" rating and a price target of 340p for the stock.