(Sharecast News) - UBS downgraded housebuilder Crest Nicholson on Friday to 'sell' from 'neutral' as it pointed to unfavourable risk/reward.
The bank said that following a strong run in the shares - up 18% above pre-mini budget levels versus the sector up 8% to 25% - it sees an unfavourable risk/reward.
"In a scenario where house prices materially decline Crest Nicholson appears the most at risk of land impairments given its lower margins (15% versus sector circa 20%)," UBS said.
"We also see execution risk in the geographic rollout: (1) capital deployment in new markets, (2) market timing and (3) increasing overheads (guided +10% for FY23)."
The bank said that over the medium term, Crest's divisions are in areas where planning restrictions appear the most acute, which could constrain volume recovery and/or reduce intake margins on land approvals.
It noted the shares trade at around 30% discount to TNAV (CY23E), which initially appears cheap, but relative to SMID cap housebuilders does not reflect the higher risk.
UBS kept its 210p price target on the stock.
Crest Nicholson (CRST)
