Jefferies downgrades Bovis to 'hold' due to failure to meet rising demand

4th Jan 2017 08:48

(ShareCast News) - Jefferies downgraded British housebuilder Bovis Homes to 'hold' from 'buy' and lowered its price target to 886p from 1,110p.Bovis has been unable to cope with an increase in the demand for houses falling short on the number of homes it hoped to deliver by year end, with 180 homes having to be brought forward into 2017.The broker lowered its rating after the company's weaker than expected unscheduled trading update, cutting its profit before tax estimates but leaving its dividend expectations unchanged.The company reported a 14% drop in the forward order book for 2017, which was due to the group had completing more sites than it launched during 2016, according to the bank.However when the 180 homes are taken into account the order book is up 7% with more homes in production at the start of 2017 than at the start of 2016.For the cumulative year 2016 the analysts moved their estimates for volumes and profit before tax to the middle of the guided range at 3,975 homes and £165m. Looking into 2017 profit before tax estimates were cut by 5.5% to reflect lower site numbers than anticipated and a further 8% due to execution challenges the group experienced towards the end of 2016."The fortunes of Bovis are linked to the underlying UK housing market. Significant reductions in employment outlook, UK house prices, mortgage availability or material changes to the supply chain are potential downside risks."Earnings per share estimates have decreased to 106p from 115p for 2017. Dividend estimates for 2017 remain at 50p.The share price fell 2.68% to 798.50p at 1029 GMT on Wednesday.