Credit Suisse starts Savills at 'outperform', names it preferred stock in the sector

17th Jul 2015 10:56

(ShareCast News) - Savills got a boost on Friday after Credit Suisse initiated coverage of the stock with an 'outperform' rating and 1,141p price target and said it was the bank's preferred name in the UK estate agency sector.CS said the stock offered strong cyclical momentum and margin expansion.It said three factors are driving. Savills is entering a unique period in which the UK prime residential, UK commercial and Hong Kong commercial real estate markets are simultaneously experiencing a period of cyclical improvement, said CS.It also noted that following its recent acquisition of Studley Inc, the group has the possibility to double its US commercial real estate business over the next three years.Finally, the bank said it expects significant cost leverage to adjusted pre-tax profit margin recovery from 9.3% in full-year 2014, to 10.8% in 2018.Credit Suisse said Savills trades on 15.8x and 13.8x the bank's FY15 and FY16 earnings per share estimates, with a 3% dividend yield and 7% free cash flow yield."We view this as undemanding for a company we expect to achieve +13% adjusted EPS compound annual growth rate in FY15E-FY18E."At 10:08, Savills shares were up 2.1% at 985p.