Portfolio

Thursday newspaper share tips: Barratt Developments, Forterra

By Alexander Bueso

Date: Thursday 08 Sep 2016

Thursday newspaper share tips: Barratt Developments, Forterra

(ShareCast News) - Concerns regarding Barratt Development's strategy and exposure to the high-end of the London market are overdone, The Times's Tempus said.
The lack of a land bank was a conscious choice by management, which decided to pursue a higher margin business model, although in uncertain times it may look like a disadvantage.

Similarly, while the property developer did lower guidance for profits from its joint-venture business in the high-end London market, it has other attractions which more than offset that negative, according to Tempus.

For starters, 30% of its sales are supported by the government's Help-to-Buy scheme.

Indeed, Barratt said that trading in the weeks since Brexit had been "business as usual" in terms of reservations and forward sales.

So the London market aside, trading is "solid".

Longer-term, the undersupply of homes is "huge", the company said.

"Simple economics dictates the UK's biggest housebuilder benefits from such a situation," Tempus mused.

'Buy', the fundamentals of a supply shortage, a los-cost mortgage market and a dividend yield of 6.7% means this is a solid stock, the tipster concluded.



Shares in brick-maker Forterra havbe receovered much of their post-Brexit drop, but builders' merchants were still sitting on big stocks of excess bricks, Tempus pointed out.

Given that there was also little expectation of a rapid recovery until the Brexit mists began to clear, the outlook was bleak.

Nonetheless, in good times the business, even when unglamorous, could deliver reliable, chunky pay-outs for shareholders.

Britain's chronic shortage of homes was a fundamental advantage, as Forterra chief Stephen Harrison, correctly pointed out.

"Tough to see why shares are a buy in present market," but 'hold', Tempus said.

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