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March 29, 2021, 10:42 a.m. EDT

JPMorgan says U.K. builders to benefit from government support and solid demand as Grenfell costs partly priced in

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By Steve Goldstein

The valuation of U.K. home builders likely already includes the impact of a roughly £2 billion levy for cladding remediation following the deadly Grenfell Tower fire, a leading broker said on Monday.

Analysts at JPMorgan say there are 465 buildings with a cladding system used on Grenfell Tower that will need replacement, citing data from the U.K. government. Of those, 52% have completed remediation, and the government estimates 85% of identified buildings will have completed remediation works by the end of 2021. Another 1,400 buildings using a different cladding system also may need remediation.

The total cost may lead to a 2% to 4% higher tax rate for 10 years. But the analysts say this is partly discounted already and unlikely to be a major concern, as they highlighted the government’s continued support for the sector and solid demand trends. The analysts upgraded Taylor Wimpey /zigman2/quotes/208623755/delayed UK:TW +1.29% to overweight from neutral on the belief earnings momentum will outperform the sector, while downgrading Barratt Developments /zigman2/quotes/209812640/delayed UK:BDEV +0.10% to neutral from overweight after a strong run.

Separately, analysts at Jefferies upped Crest Nicholson /zigman2/quotes/207992108/delayed UK:CRST -1.04% to buy from hold and lowered Bellway /zigman2/quotes/208360300/delayed UK:BWY +0.27% to hold from buy. “With an arguably more robust housing market post-COVID (in terms of desires to buy a new home, the return of house price inflation) we believe the cheaper [small to midcap] housebuilders offer increasing attraction,” they said.

Crest Nicholson shares rose 3% and Taylor Wimpey rose 1%. Barratt Developments fell 1% and Bellway fell marginally. Persimmon /zigman2/quotes/206444744/delayed UK:PSN +1.04% fell 2%.

The FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +0.76% slipped 0.2% afternoon trade, with the index largely inoculated from the forced liquidation of Archegos Capital Management, having neither lending banks nor the fund’s top holdings in the index.

Engineering group Renishaw /zigman2/quotes/200921567/delayed UK:RSW +1.72% rose 6% as Bloomberg News reported it has attracted interest from Danaher /zigman2/quotes/210555154/composite DHR +0.58% and Hexagon /zigman2/quotes/203909320/delayed SE:HEXA.B +1.77% .

/zigman2/quotes/208623755/delayed
UK : U.K.: London
180.75 p
+2.30 +1.29%
Volume: 7.05M
May 7, 2021 4:35p
P/E Ratio
30.74
Dividend Yield
2.29%
Market Cap
£6.51 billion
Rev. per Employee
N/A
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/zigman2/quotes/209812640/delayed
UK : U.K.: London
780.60 p
+0.80 +0.10%
Volume: 3.31M
May 7, 2021 4:36p
P/E Ratio
19.77
Dividend Yield
0.96%
Market Cap
£7.93 billion
Rev. per Employee
£513,779
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/zigman2/quotes/207992108/delayed
UK : U.K.: London
418.20 p
-4.40 -1.04%
Volume: 430,711
May 7, 2021 4:35p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
£1.08 billion
Rev. per Employee
£1.03M
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/zigman2/quotes/208360300/delayed
UK : U.K.: London
3,670.00 p
+10.00 +0.27%
Volume: 224,205
May 7, 2021 4:35p
P/E Ratio
24.83
Dividend Yield
2.32%
Market Cap
£4.51 billion
Rev. per Employee
£770,301
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/zigman2/quotes/206444744/delayed
UK : U.K.: London
3,199.00 p
+33.00 +1.04%
Volume: 543,567
May 7, 2021 4:35p
P/E Ratio
16.03
Dividend Yield
7.35%
Market Cap
£10.10 billion
Rev. per Employee
£637,483
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/zigman2/quotes/210598409/delayed
UK : FTSE UK
7,129.71
+53.54 +0.76%
Volume: 0.00
May 7, 2021 4:59p
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/zigman2/quotes/200921567/delayed
UK : U.K.: London
6,220.00 p
+105.00 +1.72%
Volume: 40,331
May 7, 2021 4:35p
P/E Ratio
99.81
Dividend Yield
0.23%
Market Cap
£4.45 billion
Rev. per Employee
£114,157
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/zigman2/quotes/210555154/composite
US : U.S.: NYSE
$ 258.48
+1.49 +0.58%
Volume: 2.63M
May 7, 2021 4:03p
P/E Ratio
40.71
Dividend Yield
0.32%
Market Cap
$183.31 billion
Rev. per Employee
$322,957
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/zigman2/quotes/203909320/delayed
SE : Sweden: Stockholm
kr 816.60
+14.20 +1.77%
Volume: 426,282
May 7, 2021 5:29p
P/E Ratio
43.84
Dividend Yield
0.81%
Market Cap
kr294.40 billion
Rev. per Employee
kr1.93M
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