Broker snap: Views differ on Persimmon

7th Jul 2009 13:07

Housebuilder Persimmon has seen both volume and revenues improve recently and expects that trend to continue against the weak conditions experienced throughout the second half of 2008, the company said on Tuesday morning.The trading statement was enough to persuade Panmure Gordon to issue a "buy" recommendation on the stock. "Although completions in the first half were down year on year, forward orders are now ahead at £700m (versus £650m at the same time last year). The company also continues to generate cash and has further reduced its debt levels," the broker notes. "With a well balanced seven-year land bank, strong management, a healthy financial position and improving sales trend, currently we have Persimmon as our key buy recommendation in the housebuilding sector," Panmure Gordon said. Broker KBC Peel Hunt, which has been bearish on the UK housebuilding sector for some time, takes a contrary view, rating the shares a "sell". "The IMS [interim management statement] has an upbeat tone, reflecting what we still see as a bear market rally. Pricing looks still to be trending down and, although the board talks of good comparatives, Q2 2008 was weak. The comments on debt and land provisions plus the tone are likely to push the shares ahead," KBC analyst Robin Hardy predicts."The statement suggests that no further land provisions will be needed unless there is a further step down in market conditions. While we might share this view in the near term, we still believe that we are sufficiently far from the bottom of the pricing cycle that further provisioning is still likely, albeit that it might be undertaken later," the broker concludes.