Telford Homes climbs as Canaccord Genuity bumps it to 'buy'

2nd Dec 2016 08:49

(ShareCast News) - Canaccord Genuity upgraded Telford Homes to 'buy' from 'hold' and raised its price target to 360p from 330p."We are encouraged by recent trading trends and the flexibility over the balance sheet management offered by the increasing use of Build to Rent deals," Canaccord said.Non-prime central London continues to hold up at good levels post Brexit vote with the company's forward sold position increasing to £700m and a development launch in November exceeding expectations.The group has also been more cautious in relation to de-risking and managing balance sheet debt, according to the brokers."The increasing use of Build to Rent sales channels gives us confidence that the group can continue to manage its balance sheet appropriately for market conditions."The "strong forward sold position and pipeline" gives the group has good visibility and places it to deliver strong profit growth towards its medium-term profit before tax target of £50m.The analysts expect the return on equity to improve in 2017 as the group delivers higher profits.CG expect the full year 2017 results to be significantly second half weighted with a profit before tax of £34m. Net debt is expected to increase over the next 18 months but less than previously expected, given the company's more cautious stance in the land market and the positive cash effect of Build to Rent deals.The market in which the group operates continues to be under-supplied and attractive to prospective purchasers, according to the broker.The group looks well placed to significantly increase in scale over the next five years, with management expecting to double its size. The use of more Build to Rent sales can also be used to de-risk the balance sheet or drive more growth.Telford Homes share price rose 1.68% to 0913 GMT on Friday.