英国房屋建造业深度研究(1)

CitigroupResearchisadivisionofCitigroupGlobalMarketsInc.(theFirm),whichdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethattheFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.Non-USresearchanalystswhohavepreparedthisreportarenotregistered/qualifiedasresearchanalystswiththeNYSEand/orNASD.1CitigroupGlobalMarketsLtdCitigroupGlobalMarkets|EquityResearchPan-EuropeHomebuildingIndustryIn-Depth15December2006|104pagesUKHousebuildingAQualityStreetbutTimetobeSelectiveThesectorhasoutperformedthemarketagainin2006(eighthyearinarow)—Itiscurrentlyup28%yeartodateaftera45%climbin2005anda12%gainin2004.ThebeststockperformershavebeenWilsonBowdenandBerkeleyGroup—bothupover50%in2006.TheweakestperformershavebeenthetwoUSexposedstocks—TaylorWoodrowandWimpey.FundamentalsintheUKhousingmarketremainrobust—Ashortageofsupplyduetotightplanning,demographic-drivendemandandpositiveprices.Thesectorremainstooconservativelyfinanced—Averagegearingof30%andinterestcoverof11.3x.Thiscanbeimprovedbysharebuybacks,increaseddividends(sectordividendcoverisc3.7xin2006),increasedlandspend(butonlyifvolumescanbeincreased)orcorporateactivity.Sectorconsolidationisalsosettocontinue—Andwhilethereareclearsynergiesforindustrialbuyersthebiggerdebateiswhetherornottheprivateequityindustrywillenterinabiggerway.Wehaveuppedtargetpricesacrossthesector—Partlybecausewehaverolledourcalculationstotheendof2007butalsobecausewehaveincludedafreecashflowelementinourmatrixaswellasuppingoursectorP/Etargets.WeremainBuyersofBarratt,Bellway,Persimmon,TaylorWoodrowandWimpey—WehavealsocutBerkeleyGrouptoSellanddowngradedBovisandRedrowtoHold.Figure1.UKHousebuildingSector—%ChangeRelativetoFTAllShare-30%-20%-10%0%10%20%30%40%50%1997199819992000200120022003200420052006Source:[e-mail][e-mail],[e-mail]@citigroup.comSeepage99forAnalystCertificationandimportantdisclosures.UKHousebuilding15December2006CitigroupGlobalMarkets|EquityResearch2ContentsInvestmentSummary3CurrentTradingand2007Outlook4PriceTarget&RecommendationChanges9AssetBackingandtheDiscountedLiquidationValuation10Land—theBlackArtofHousebuilding13SharePricePerformance17SeasonalInvesting20SectorConsolidationandOtherCorporateActivity21Gearing&InterestCover25SectorValuationSummary27StockValuationData28HousingSummary31HousingData33BarrattDevelopments1M36Bellway1M42BerkeleyGroup3M48BovisHomes2M54CrestNicholson2M60Persimmon1M66RedrowGroup2M72TaylorWoodrow1M78WilsonBowden3M84Wimpey(George)1M90AnalystCertificationAppendixA-199UKHousebuilding15December2006CitigroupGlobalMarkets|EquityResearch3InvestmentSummaryWhile2006hasonlybeenasolidyearforhousingactivityintermsofvolumesandpricesthesectorhasagainoutperformedthemarket,makingiteightyearsonthetrot.Yetagainthereasonfortheoutperformancethisyearhasbeenvaluationmultipleexpansionasearningsgrowthhasonlybeen1%thisyearafteraflatperformancein2005(calendarised).Thesectorisnowtradingon11.4xearningsforcalendar2007Eand12.7xfor2006E.Thelackofvolatilityintheearningsprofile,increasedsectorconsolidationandongoingscopeforade-equitisationofthesectorcontinuestodrawinvestorsin.Itwouldberelativelyeasytobackoffthesectorandtakeprofitsbutwestillseereasonablevalueacrosstheindustryespeciallyasthefundamentalshortageremainsfirmlyinplace.Outlookfor2007Weseeanotherrobustyearforthehousingindustryin2007withvolumesprobablyedgingaheadandpricesrunningatleastinlinewithinflation.Moreaggressivegrowthshouldresultinhigherinterestratesandaknocktoconsumerconfidence.WehavemadeonlyveryminorchangestoourforecastsinthisnoteHowever,wehaveuppedourpricetargetsonthebackofusing2007forecasts,ratherthan2006,andincludingafreecashflowelementinourcalculations.Figure2.SectorRecommendationandPriceTargetSummaryCompanyNewTargetPriceRecommendationBarratt1430pBuyBellway1830pBuyBerkeley1680pSell(Hold)Bovis1050pHold(Buy)CrestNicholson615pHoldPersimmon1710pBuyRedrow715pHold(Buy)TaylorWoodrow490pBuyWilsonBowden2100pSellWimpey690pBuySource:CitigroupInvestmentResearch.Previousratingsareinbrackets.UKHousebuilding15December2006CitigroupGlobalMarkets|EquityResearch4CurrentTradingand2007OutlookThehousebuildersstarted2006withgoodmomentumfromarecoveringhousingmarket.Volumegrowthofbetween5%and10%waswidelyanticipatedwithmodesthousepriceinflationofbetween1%and2%.Theindustryhadgenerallyincreasedthenumberofsitesinordertodeliverthevolumegrowthinalowerinflationaryenvironmentthaninrecentyears.Asthemarketrecoverytookholdsalesincentiveswereexpectedtoeasealso.Thespringsellingseasonwasindeedstrongwithpositivelike-for-liketrendsinreservationspersitesupportedbybothastrongermarketandaweakcomparative.LondonandtheSouth-Eastcontinuedtoleadtherecoveryandnetpricesbegantoedgeupwardswithsellingincentiveseasingback.Althoughthesummerslowedinitsusualseasonalmanner,perhapsex