U.K. Homebuilders in Deep Value Territory As Financial Conditions Tighten Rapidly; FVEs Unchanged

We make no change to our fair value estimates for our U.K. homebuilder coverage despite the marked volatility in U.K. fixed-income markets brought on by the U.K. government’s recently announced package of tax cuts. Accordingly, we reiterate our per-share respective fair value estimates for no-moat Barratt Developments, no-moat Taylor Wimpey, no-moat Persimmon, no-moat Bellway, and no-moat Berkeley Group of GBX 750, GBX 190, GBX 2,530, GBX 3,750, and GBX 4,950 respectively. While shares in all U.K. homebuilders under our coverage trade at significant discounts to their unchanged valuations, Bellway remains our top pick. We think Bellway’s market share growth ambitions will deliver partial offset to earnings weakness brought on by cyclical U.K. housing market headwinds now forming.