JPMorgan upgrades Berkeley Group to 'overweight', shares rise

(Sharecast News) - Housebuilder Berkeley Group got a boost on Wednesday after JPMorgan lifted the stock to 'overweight' from 'neutral' and hiked the price target to 5,000p from 4,700p. JPM noted that in recent years, London's housebuilding has collapsed amid a "perfect storm" of regulatory and affordability issues. However, the bank now sees reason for trends to inflect with policy support on the horizon.

"As well as potential improving trends in its core housebuilding business, our detailed analysis in our UK Housing: Rental 101 published this morning has showcased a supply/demand mismatch and thus we now see a highly attractive setup in the London rental market and Berkeley's Build to Rent platform offers a direct exposure to these trends which is unique among its peers," it said.

JPM said it also sees a highly compelling capital allocation framework, with the company committing to return a further £1.7bn by 2034, which equates to about 44% of its market cap. It also said this could rise to 78%, when considering the flexible allocation of £1.3bn which could also be returned to shareholders.

JPM said the valuation looks undemanding with the stock on a 40% discount versus its historical P/TNAV, while the sector is on a 31% discount.

"Our revised Dec-27 PT increases to 5,000p as we now value the shares on a higher P/TNAV multiple at 1.2x to reflect improving conditions in the company's core markets and earnings/shareholder potential of its Berkeley 2035 strategy," it said.

At 0930 GMT, the shares were up 2.9% at 4,286p.