20th March 2015
Housebuilder Berkeley Group has been recommended as a ‘buy’ due to the £2.7 billion cash windfall it will receive from forward sales.
The FTSE-250 listed group announced a trading update this morning that reported it was still seeing strong property demand in London and the South East and is in construction on 64 sites in the two regions.
It also reported that it expects to receive £2.7 billion in cash over the next three years thanks to forward sales.
Ian Forrest, investment research analyst at The Share Centre, retained a ‘buy’ recommendation on the shares, which are currently trading at up 1.7% today at £26.67 per share.
‘Berkeley announced continue good demand for new houses. Investors should note that the housebuilder expects to see a return to more normal business levels following a spike in activity over the last two years,’ he said.
‘The combination of a strong balance sheet and forward sales put the group in the unusual position of being able to forecast its earnings over the next three years, with a degree of certainty. The group said it expects to receive £2.7 billion in cash over the next three year…and confirmed payment of the 90p dividend as the latest instalment of its capital repayment plan, which will please income investors.’
Berkeley is aware that the party or parties that win the next election could change its fortunes and called on the next government to deal with the undersupply of new housing and encourage more investment, which will be of benefit to shareholders.
‘We continue to recommend Berkeley Group as a ‘buy’ due to the strong demand for new houses. The relatively attractive valuation of the shares and the healthy balance sheet all combine to give investors, especially lower risk income-seekers, a great deal of confidence that the high dividend yield will be maintained,’ said Forrest.