Broker snap: Refinancing still a worry at Taylor Wimpey

3rd Aug 2010 12:08

A set of results from a housebuilder is usually a prompt for KBC Peel Hunt's analyst on the sector to issue a bearish note, and the interim figures from Taylor Woodrow on Tuesday lured the bear from his lair once again.Robin Hardy of KBC Peel Hunt acknowledged that profit before tax beat market consensus and the UK margins were stronger than expected but he still has concerns about trading prospects for the rest of the year and also 2011, while he still sees specific risks for Taylor Wimpey around its need to refinance its debt."The main issue with debt for us remains the refinancing process where the banks are likely to have to materially increase their exposure to the group as commercial paper matures and is unlikely to be replaced. We remain concerned that the disposal of the North American businesses were taken too much for granted and that the covenants tests and renewal process may not be more onerous than the group had been expecting when the new facilities were put in place last year," Hardy said.Using its new valuation methodology, which entails determining a notional net asset value that would be required to drive an acceptable return on capital employed that would be above the cost of capital, the broker's price target is 21p. With the shares trading fully 10p above that level on the day the results were announced the broker is, not surprisingly, sticking with its "sell" recommendation.