Travis Perkins Rises on U.K. Home Buying Measures: London MoverDavid Risser
Travis Perkins Plc rose for a sixth day, the longest streak in more than five months, after analysts said the builders merchant may profit most among its peers from new U.K. initiatives to assist home purchases.
Travis Perkins “stands to benefit most from any increase in activity” because it has about “25 percent exposure to the new residential sector,” analysts at Goodbody said today. The company gets all of its revenue in Britain and will also reap more rewards than some U.K. businesses from a lowering of the corporation tax rate, the Dublin-based stockbroker said.
Travis Perkins shares rose 2.4 percent to 1,443 pence at the close in London. That extended the gain over six days to 8.7 percent in the longest streak since early October.
U.K. Chancellor of the Exchequer George Osborne, whose popularity has plunged while the government pursues austerity measures, pledged 3.5 billion pounds ($5.3 billion) yesterday to help buyers of new homes with loans. He also announced a plan to guarantee as much as 130 billion pounds of new mortgages to help purchasers with limited cash for deposits. The Bloomberg EMEA Homebuilders Index climbed to the highest in almost five years.
Among companies that serve the building industry, the “Help to Buy” measures for existing homes will benefit Travis Perkins because “repair, maintenance and improvement activity in the secondary market is a key driver of sales,” Davy Stockbrokers said today in a note.
Travis Perkins has gained 33 percent this year, the fourth-biggest advance among the 31 companies on the FTSE 350 Support Services Index. Howden Joinery Group Plc, a maker of fitted kitchens that may benefit from the U.K. housing measures, has also risen almost 33 percent. SIG Plc, a distributor of building products such as insulation, is up 34 percent.
Goldman Sachs added Travis Perkins to its “conviction buy” list on March 15 and predicted the shares will rise to 1,708 pence, or almost 29 percent higher than the closing price on the previous day.
The building materials supplier said Feb. 20 that while 2013 market volumes may be lower than in 2012, the rate of decrease will lessen to 1 percent to 2 percent as construction picks up. Pretax profit excluding some items in 2012 beat analyst estimates and the Northampton-based company raised its final dividend more than predicted.
“A gradual recovery in our markets, together with targeted like-for-like volume outperformance and tight control of costs should deliver an expansion of our operating margins,” Chief Executive Officer Geoff Cooper, said at the time.
Of 23 analysts who report their predictions on Travis Perkins to Bloomberg, 10 rate the stock buy, while nine favor holding the shares and four recommend selling.
The U.K. measures are also significant for Grafton Group Plc and Wolseley Plc, as well as Cie. de Saint-Gobain SA of France, according to Davy analysts led by Robert Gardiner.
Grafton rose 2.8 percent in Dublin trading, while Wolseley retreated 1.9 percent in London from a five-year high reached yesterday. Saint-Gobain fell 2.3 percent in Paris.