Berenberg hikes target price on Bellway

Analysts at Berenberg raised their target price on construction firm Bellway from 3,240.0p to 4,180.0p on Wednesday, stating the group's record land buying showed "fresh confidence".

Berenberg said so far in 2021, Bellway had been "one of the best performing housebuilders", up 22% versus the sector and, as a result, the share price had closed the discount to its historic average multiple of 1.3x book value.

Despite this, the German bank still thinks that upside to forecasts remain in the near-term and, longer-term, said it was "confident" that Bellway will continue to be "managed well" and can increase volumes towards its roughly 4,000 capacity while delivering "attractive returns" for shareholders.

Berenberg, which stood by its 'buy' rating on the stock, noted that Bellway was the only volume housebuilder with an unbroken dividend track record and that it had grown tangible book value per share by 159% over the last decade.

The analysts also highlighted that for the last several years, Bellway had maintained its landbank at four years, the lower end of its guided range of 4-5 years. Berenberg stated that management had indicated that it wishes to increase it closer to five years and, in the first half, it contracted to buy a record 8,848 plots and hopes to complete 16,000 deals in the year.

"Purchases will not only make up for the shortfall from last year, but also set up Bellway for the next phase of growth – particularly beyond the end of Help to Buy in 2023," concluded Berenberg.