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Hard on the heels of yesterday's record losses of £1.9 billion from housebuilder Taylor Wimpey comes news that Goldman Sachs has upgraded two other companies in the sector because it thinks they look good value for money.
Goldman has raised Barratt Developments, 9¾p better at 128p, from neutral to buy and jacked up its six-month target from 64p to 155p. It has lifted Redrow, up 16p at 192½p, from sell to neutral and raised its target from 80p to 174p. Berkeley, 5p lower at 995p, is still rated a sell, but Goldman has lifted its sights from 505p to 899p.
The broker says the near-100% rally by housebuilders since October, has repriced the sector from severely depressed levels. It describes the rally as “early” and forecasts further pressure on pricing during the next year, but does not expect prices to fall below the historical average level because of the lower interest rate environment.
Meanwhile, Numis Securities has downgraded Taylor Wimpey, 3½p firmer at 43¼p, from buy to hold after the debt-laden company said it was close to signing amended facilities with the banks. Taylor Wimpey owes the banks about £1.8 billion, and Numis says this deal give a more appropriate set of covenants and maturities as far out as 2012. But it reckons the shares are up with events, and better value can be found elsewhere.
Shares generally put up an impressive performance in the face of a sell-off in New York overnight that spilled over into Asia this morning. They traded above their worst levels, and the FTSE 100 index managed to pare back its loss to 4.65 at 3925.87.
Banks clawed their way back from opening falls. But some brokers have been taking an increasingly pessimistic view of their prospects in the wake of the subprime meltdown. Government-owned Royal Bank of Scotland touched 25.5p after yesterday going back on its word to protect jobs by shedding 9000 of them worldwide. It later rallied to post a rise of 0.1p at 26.8p. Lloyds Banking Group rose 0.3p to 73.1p after briefly touching 69p.
Property companies benefited from Nomura's move to adjust some of its share-price targets. It has raised Liberty International, 12¾p dearer at 408p, from 416p to 430p with a neutral rating. British Land, up 24¾p at 415p, is moved from 312p to 368p with a reduce rating, while Brixton, ¼p adrift at 23¼p, is upgraded from 30p to 40p and seen as a buy. Derwent, 1p better 727p, is lifted from 749p to 765p with a buy rating. Land Securities, 24p dearer at 511½p, goes from 483p to 567p with a buy call.
Pace, which makes TV set-top boxes, jumped 41¾p to 141¼p. Altium has raised its target from 125p to 200p.
Oil shares took a battering as investors reflected on the crude price, currently languishing around $48 a barrel. BG Group was one of the biggest blue-chip casualties, losing 35p at 1031p. There were also losses for Tullow Oil, down 8½p at 753p, Cairn Energy, off 50p at 2085p, and oil services provider Petrofac, 6p cheaper at 545½p.
Dana Petroleum shed 30p to 1138p after Australia's Beach Petroleum plugged and abandoned the South July-1 well in Egypt. Dana owns 66.6% of the project. Oriel Securities had calculated that the success of the project could be worth about 40p a share to Dana. It has repeated its reduce rating.
Morgan Stanley has lifted its target for caterer Compass, up 6½p at 317½p, from 360p to 420p in the wake of first-half numbers that reflected a strong margin improvement and growing confidence on the part of management. The broker says there is still scope for gains by the shares, and investors are underestimating the potential that remains for margin expansion.
On AIM, shares of Powerleague, the five-a-side football centres operator, jumped 4p to 41p as the likelihood of a takeover bid from its biggest shareholder Patron Sports took a step closer. Patron already holds a 29% stake in Powerleague, and is now considering its options.
