Broker tips: Housebuilders, Dr Martens, REITS

UBS has upgraded Crest Nicholson, Persimmon and Vistry Group in its latest review of UK housebuilders.

In a note published on Monday, the bank said it was a "mixed picture" for the sector, but was turning "somewhat more positive".

It continued: "We see a bit more value after the recent pullback in the sector, but think the recovery path remains uncertain.

"The key questions from here are whether the housing market - both in terms of price and sales rates - continues to recover, and how the policy backdrop evolves."

It noted that risks included further downside to house prices, sticky build-cost inflation and mortgage rate volatility, but that on balance, "valuations look reasonably attractive".

Crest Nicholson, Persimmon and Vistry were all upgraded to ‘neutral’ from ‘sell’, while ‘buy’ recommendations on Barratt Developments, Bellway, Berkeley, Redrow and Taylor Wimpey were reiterated.

UBS also increased price targets on all housebuilders bar Redrow, which it left unchanged at 600p.

RBC Capital Markets slashed its price target on Dr Martens to 150p from 180p, keeping the rating at ‘sector perform’, as it lowered estimates after the bootmaker’s results.

"FY24E may be characterised as a transitional year as DOCS makes necessary improvements to its business model including investments in supply chain, marketing and functions, wholesale distribution clean-up and right sizing inventory levels," RBC said.

"Demand outlook is mixed, however DOCS benefits from perimeter and channel mix tailwinds, providing some offset."

RBC said it views the equity set-up as balanced from a risk-reward perspective, particularly given materially lower FY24E earnings guidance.

The bank cut its estimates for FY24 EBITDA by 4%, EBIT by 13% and earnings per share by 15%, reducing the price target.

Goldman Sachs downgraded Great Portland Estates and Segro as it took a look at real estate investment trusts.

The bank downgraded GPE to ‘sell’ from ‘neutral’ and cut the price target to 440p from 470p as it said it was cautious on central London offices.

GS noted that deal activity is near Great Financial Crisis lows. "We think this, together with approaching debt maturities, will continue to put upward pressure on yields," it said.

"In addition, we expect a spike in new office supply in 2023 (the highest since 2003) is likely to have a negative impact on ERV growth; our forecasts mostly sit toward the low end or below management guidance on ERVs and our office-exposed NTA estimates sit on average circa 2% and c5% below Visible Alpha Consensus over the next 12/24m."

GS said it prefers to position away from relatively higher LTV portfolios exposed to City offices and where it sees medium-term returns unable to overcome a higher cost of capital in this rising yield environment.

In the same note, it downgraded Segro to ‘neutral’ from ‘buy’ and cut the price target to 800p from 900p as it said it sees less upside after a period of outperformance.

"We believe valuation at a 14% discount to EPRA NTA/share reflects only an average (and negative) cash spread to weighted average cost of capital (which we increase by 35bps) versus UK peers," it said.

"In addition, we see risk of a softer outlook for leasing demand, including due to weak Manufacturing PMI data."

Goldman retained its ‘neutral’ rating on Landsec and Derwent.