Liberum slashes MJ Gleeson price target

Liberum cut its price target on MJ Gleeson on Friday to 560p from 700p following an update in which the builder said it had seen a surge in cancellations, after demand slumped in the wake of September’s mini budget.

Liberum, which is Gleeson’s house broker, noted that after a six-week period of slow sales, management now expects Homes’ 2023 volumes to fall to 1,600-2,000, down up to 25% on 2022.

The broker cut its FY23 earnings per share estimate by 30% on lower Homes and Land profits and reduced its forecast for unit completions in 2023 to 1,750 from 2,000.

"Homes is seeing trends observed elsewhere, but completions are more impacted as it deliberately carried a lower order book into the year," it said.

"We are encouraged that Gleeson is attracting new buyers to its better value proposition, pricing remains robust, and we see mortgage rates falling in 2023 and the outlook clearing.

"We still see over 50% total shareholder return to our sum or the parts-based valuation. Investors should not forget Homes’ excellent growth track record and prospects on rising site numbers."

Liberum rates the shares at ‘buy’.