Stifel names two top picks in UK housebuilders amid Japanese takeover interest

Investing.com -- The Daiwa House deal for a 30% stake in UK private housebuilder Miller Homes, reportedly valued at £400 million, highlights the potential for consolidation in a sector trading at about 0.7 times tangible book value, Stifel said.

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Analyst Charlie Campbell said the valuation discount leaves UK housebuilders vulnerable to takeover activity, while highlighting Persimmon and MJ Gleeson as the broker's preferred stocks on fundamental grounds.

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Persimmon, rated "buy" with a 1,169 pence target, benefits from exposure to the more affordable end of the housing market and a growing partnerships business, the broker said.

Those characteristics also helped drive Miller Homes' returns, with Daiwa's deal valuing the company at 2.4 times tangible gross asset value, well above the sector average of 0.7 times.

MJ Gleeson, also rated "buy" with a 249 pence target, offers similar exposure to affordable housing and partnerships, Stifel said.

Partnerships accounted for 22% of Miller's completions and contributed to its 27.5% pre-tax ROCE, compared with a sector average of 11%.

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