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FTSE falters on China and UK construction, with housebuilders sliding

Discussion in 'Market News' started by Lily, Apr 15, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
    Likes Received:
    Caution from Persimmon puts housing sector under further pressure

    Leading shares are slipping lower after China’s economy saw a slowdown in the first quarter, albeit in line with expectations.

    But the biggest fallers in the UK index were closer to home. Following Persimmon’s cautious trading update on Thursday, housebuilders are leading the way down, with Berkeley Group 106p lower at £28.70, Taylor Wimpey down 4.2p at 172.8p and Persimmon itself falling 21p to £18.79.

    We think the flows figure represents a good performance in a difficult quarter for fund managers and indeed at the time of the final results on 24 February, the company had indicated the net flows for 2016 were slightly negative at that stage.

    Based on last night’s closing price of 151.5p and before any changes to forecasts (which we provisionally expect to be minor), Man trades on 10.9 times our December 2016 adjusted earnings per share of 19.8c (translated at $1.42/£), falling to 10.4 times in December 2017 (20.7c). The prospective December 2016 dividend yield is 4.7% (10.2c). We think these multiples, an around 20% discount to the sector, materially undervalue a company ... and we think it should trade at a sector premium. Our fair value is 245p, buy.

    A bull would highlight that funds under management flat on the year end at $78.6bn was a good result given the market volatility. A bear would suggest that net inflows of just $0.5bn were dull and coupled with a cautious outlook statement then the risk to forecasts is probably to the downside.

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