Homebuilders and building supplies: outlook constructive - Citi

Five Point Holdings LLC

19/06/2018 15:16

** Homebuilders and light building supply cos look set to
continue benefiting from housing market strength, writes lead
analyst Scott Schrier in a Citigroup research note
    ** Rating changes: broker upgrades Beacon Roofing Supply Inc
 BECN.O  and Masco Corp  MAS.N  to "buy" from "neutral,"
promotes PulteGroup Inc  PHM.N  and KB Home  KBH.N  to "neutral"
from "sell," downgrades Five Point Holdings LLC  FPH.N  to
"neutral" from "buy"
    ** Schrier says despite concerns related to cycle duration,
population demographics and density support housing starts
approaching 1.45 mln (mean since the 1960s)
    ** Favors materials over builders due to rising materials,
labor costs
    ** "We continue to view smaller builders as take-out targets
due to both the valuation gap and the potential for larger
builders to gain both scale and land at a relative discount,"
writes Schrier
    ** On Jun 18, the National Association of Homebuilders
Housing Market index posted a reading of 68, two points lower
than consensus estimates; the index has been in optimistic
territory (above 50) for 4 years (graphic: http://tmsnrt.rs/2fuZSbc)
    ** So far this year, the S&P 1500 Homebuilding index
 .SPCOMHOME  has slid ~14 pct, while the Dow Jones US
Construction Materials index  .DJUSCN  has dropped by >6 pct

 (Reporting by Stephen Culp)
 ((stephen.culp@thomsonreuters.com; 646-223-6076;))