Also citing a “slew of additional costs” for the housebuilder, the German bank cut its rating to ‘hold’ from ‘buy’ and slashed the price target to 2,422p from 3,093p, with the shares having last closed at 2,437p.
Analysts Jon Bell and Dheeraj Singh admitted that concerns over productivity levels were “so subjective in reality it is hard to make useful comparisons with peers” but followed comments from the FTSE 250 company’s last week, which have already sparked downgrades from other brokers.
Bellway had pointed to “incremental costs, arising from extended site durations due to reduced productivity and enhanced health and safety requirements”, which it said will result in a lower gross margin across its building sites for the year ended July 31, 2020.
Deutsche’s pre-tax profit forecasts for 2020 through to 2022 have now been slashed 36% to 47% to reflect the impact of Covid-19.
The analysts noted that Bellway’s shares trade only marginally below 2021 estimated book value, around 0.9 times to be more exact, despite a respectable return on average capital employed of 12.3% that is felt to is “likely above the cost of capital”.
“However, to reflect significant reductions to our estimates, we lower our target price”, the number crunchers said, seeing the shares as “largely up with events”.
Shares fell a few pennies to 2,423p on Friday morning, down 37% since the start of the year.