Equity Analysis /
United Kingdom

GB : Redrow - Growth is still undervalued

    Charlie Campbell
    Charlie Campbell

    Analyst - Building Materials, Equipment Hire & Housebuilders

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    Marcus Cole
    Marcus Cole

    Analyst - Building Materials, Equipment Hire & Housebuilders

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    CGS-CIMB
    13 April 2021
    Published byCGS-CIMB

    Redrow is the cheapest housebuilder, which undervalues its growth potential. The shares trade on 9x CY21E earnings, 24% cheaper than the sector’s 12x, despite our estimate of 11% p.a. EPS growth in FY21-24E compared to 8% for the sector, and a track record of growing significantly faster than the sector. Redrow’s valuation overstates the Stamp Duty/Help to Buy taper headwinds. Redrow has continued its reservations momentum beyond the cliff edge and we calculate the taper may only hit earnings by c.3%. The shares should re-rate as the Help to Buy taper transition develops, as earnings prove more resilient than expected.