Bloomberg News

Berkeley Shares Rebound on Capital Property Hope: London Mover

May 11, 2012

Berkeley Group Holdings Plc (BKG), the U.K.’s worst performing publicly traded homebuilder this year, rebounded from a five-month low as investors bet that exposure to London residential real estate will boost annual earnings.

Most of Cobham, England-based Berkeley’s rivals have gained in recent months as they boosted efforts in the U.K. capital after the British housing market plummeted in 2008, Mike Bessell, an analyst at Investec Ltd., said in a phone interview.

Berkeley advanced for a third consecutive day, rising 2 percent for a three-day gain of 5.8 percent, the biggest since Jan. 10. The shares, the worst performer in the FTSE 350 Household Goods & Home Construction Index (F3HOUGE) this year, hit a five- month low on May 8. That came even as Berkeley has the highest percentage of buy recommendations from analysts among companies in the index.

Berkeley abandoned high-volume homebuilding in 2004 and concentrated on houses rather than apartments in urban areas. It has benefited by focusing on London and southeast England, where house prices have been the most resilient as the economy continues to falter.

“Berkeley is entirely focused on the southeast and 50 percent of its operations are in London, which are the strongest performing markets in the U.K,” Bessell said.

The homebuilder has “never been seen as a recovery play” by investors, while competitors such as Barratt Developments Plc and Taylor Wimpey Plc (TW/) are in “recovery mode,” the analyst said. The two rivals both took millions of pounds in writedowns following the housing collapse and have risen 40 percent and 24 percent, respectively, this year. Berkeley shares have declined 2.4 percent.

Earnings Prediction

Berkeley’s pretax profit may gain 30 percent to 177.8 million pounds in the fiscal year ended April 30, a according to the average estimate from 13 analysts surveyed by Bloomberg.

Barratt (BDEV), the U.K.’s largest homebuilder by volume, said yesterday that it had the best spring selling season in five years as reservations and prices increased. Its shares rose 5.4 percent, the most in more than two months, and gained another 3 percent today.

Residential real estate values in London will decline 0.5 percent this year, beating a 2 percent drop for the rest of the U.K., according to real estate broker Savills Plc. (SVS)

Among recommendations shared with Bloomberg by analysts, Berkeley has buy ratings from 71 percent, compared with a range of 25 percent to 59 percent for other companies in the FTSE household and homebuilder index.

To contact the reporters on this story: Chris Spillane in London at cspillane3@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net


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