Taylor Wimpey PLC (LON:TW.) is a taking a punchy bet on a housing market recovery after its £522mln fundraise overnight, according to analysts.
The housebuilder has earmarked the money for buying land for future developments cheaply following coronavirus lockdown disruption.
Clyde Lewis, an analyst at Peel Hunt, said: “What intrigues me is that they are making this move with only three weeks of sales data post easing of lockdown to go on.
“This could easily be the first up part of a “W” bounce….”
The broker added that the housebuilder had completed deals for 12 sites, has agreed terms in principle on 13 more with 6,500 plots with another 60 sites in the pipeline.
The group is currently operating off 233 outlets, added the broker, so this would be a material increase in activity if the group completed all of them.
The 13 sites where final terms are yet to be agreed would probably cost £300-400m, said Peel Hunt, as well the £136m spend on the 12 agreed sites.
Together this will consume most of the placing cash, said Lewis.
David O’Brien at Goodbody added that Taylor Wimpey is expecting the market environment to support robust sales rates and for prices of new build homes to remain broadly stable over the medium term.
Those assumptions around market activity and pricing ‘appear somewhat optimistic in our view,’ he said, but nonetheless Goodbody still respects the returns on land acquisitions to be relatively attractive’.
William Ryder at Hargreaves Lansdown, meanwhile, said Taylor Wimpey’s move was a vote of confidence in the housing market.
However, if the economy fails to gather the momentum needed to pull itself out of this slump, house prices could fall heavily.
“In this case, Taylor’s confidence will look like hubris, and investors will regret pouring in additional funds.
“But fortune favours the bold, and courage now could set Taylor up for years of strong returns.”
Shares fell 5% to 143.9p compared to the placing price of 145p.
Published at Thu, 18 Jun 2020 13:25:00 +0000-Taylor Wimpey taking punchy bet on a housing market recovery, say analysts