Numis cuts Taylor Wimpey to 'hold'

10th Mar 2014 11:13

Numis Securities has downgraded house builder Taylor Wimpey from 'add' to 'hold' but has lifted its estimates after the company's 2013 results and the cash return revealed last month.Full-year profit before tax (PBT) grew by 47.6% to £268m last year, in line with the broker's prediction. However, due to improved guidance on volumes and sales prices, as well as increased confidence in the margin outlook, PBT forecasts for 2014 and 2015 have been lifted.Taylor Wimpey also announced the details of its cash return, pledging to return £50m in 2014, rising to £200m in 2015, in addition to the normal dividend payments.While the company said that the £200m payment should be seen as a benchmark for sustainable payments going forward, Numis estimates that the special dividend could rise substantially by 2016."We actually forecast that Taylor Wimpey will be able to return circa £380m (circa 10% of the market cap) in 2016, whilst investing in the business and growing its net cash position."In our view this makes the shares look attractive relative to the other housebuilders engaging in cash returns, but on our preferred valuation metric the shares look broadly fair value. On this basis we increase our target price to 130p but move to a 'hold' rating."The stock was down 2.3% at 118p by 11:27.BC