Canaccord Genuity ups Bovis Homes to 'buy'
Canaccord Genuity upped its stance on shares of housebuilder Bovis Homes to ‘buy’ from ‘hold’ on Friday, lifting the price target to 1,260p from 1,150p as it highlighted the "good strategic rationale" of its acquisition of Galliford Try’s housing business.
It said the deal immediately increases the scale of the business and accelerates the group's entry into Partnerships & Regeneration.
"We expect strong earnings enhancement of circa+11% and +15% in 2020 and 2021, respectively, supported by the targeted synergies of £35m," it said.
Canaccord said the partially paper-funded nature of the deal and placing also ensure that the balance sheet remains relatively comfortable, despite the strategic and transformative nature of the acquisition.
"While the dividends look attractive, the investment case turns to more one of growth rather than capital returns.
"Clearly, macro and political risks remain but assuming the new housing market backdrop remains supportive, we believe the group is well positioned to de-leverage and deliver significant growth over the medium term."
Bovis announced earlier this month that it had agreed to buy Galliford’s housebuilding arm in a £1.1bn deal.