Broker snap: Write-backs a possibility for Persimmon

23rd Apr 2010 12:53

Panmure Gordon has reiterated its 'buy' recommendation for Persimmon following the housebuilder's interim management statement earlier this week."We believe that its aggressive stance on write-downs versus its peers and the prospect of another year of strong cash generation in 2010, leave the business well placed to deal with a range of market conditions," Panmure Gordon thinks. The broker notes that Persimmon's volumes were 11% ahead of last year's levels, suggesting that prices are on the rise. "While we expect prices have benefited from a small element of inflation, we believe the rise will be primarily due to mix, with more private versus social completions and more houses versus flats," the broker surmises.If prices are on the rebound then Persimmon may be inclined to write up the value of its land bank when it releases its interim results, which would "offer protection to the downside" in terms of the share price valuation. Panmure Gordon also likes Persimmon's strong cash generation and thinks the company "is unlikely to need a dilutive fundraising at any point, and should therefore report robust NAV [naet asset value] numbers."As well as reiterating its 'buy' recommendation the broker has maintained its 555p target price.