UBS increases Crest Nicholson shares target, cites margin improvements By Investing.com

On Friday, Crest Nicholson (CRST:LN) shares saw its price target increased by UBS to GBP2.55, up from GBP2.25, while the firm maintained a Buy rating on the stock. UBS cited several reasons for the positive outlook, including the resolution of legacy issues and the potential for improved performance.

The company recently booked an additional £31 million in legacy site provisions after a review by external consultants, which was initially expected to be a £15 million charge. These provisions relate to sites constructed prior to the fiscal year 2019. UBS believes this move could resolve known legacy issues, allowing Crest Nicholson to enhance its performance moving forward.

UBS’s optimism about Crest Nicholson is based on three main points. First, the firm anticipates a structural shift in the company’s margins as it moves away from legacy sites between fiscal years 2024 and 2026 and transitions to higher-margin land.

Second, the valuation is seen as appealing at 0.7 times price to tangible net asset value (P/TNAV), which is below the long-term average of 1.29 times P/TNAV. This valuation suggests an attractive entry point for investors seeking exposure to a recovery in the UK residential market.

Lastly, Crest Nicholson has recently welcomed a new management team, with a new Chief Financial Officer joining in November 2023 and a new Chief Executive Officer starting on June 3. The fresh leadership is expected to contribute positively to the company’s trajectory.

The upward revision in the price target reflects UBS’s confidence in Crest Nicholson’s strategic direction and its potential for improved financial performance in the coming years.

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