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Housebuilder Galliford Try upgraded by Numis after strong annual results

Numis said it sees "scope for upside on an absolute basis" for Galliford Try following its strong full year results performance
Galliford raised £150mln from a rights issue earlier this year and said it had a strong pipeline of upcoming projects

Galliford Try plc (LON:GFRD) was upgraded to an 'add' recommendation by broker Numis on Friday, a day after the housebuilder reported strong growth in annual profit, boosted by a good performance at its Linden Homes business.

The company reported a 28% uplift in pretax profit in the year to the end of June on revenues 11% higher at £3.1bn on Thursday. The construction and property group, which raised £150mln from a rights issue earlier this year, said it had a strong pipeline of upcoming projects.

READ: Galliford Try profits boosted by strong house-building performance

"Galliford announced pretax profit that was 3% ahead of our expectations, although the beat was driven by two lumpy/non-recurring items. We therefore leave our 2019 forecasts unchanged and introduce 2020 estimates for the first time, which suggest 7% EPS growth. Galliford trades on a CY 2019 P/E ratio of 7.7x (sector average: 7.6x), P/NAV of 1.68x (1.52x) and yield of 6.5% (7.3%).

The broker said that Galliford's pretax profit performance was 3% ahead of its expectations and that with the company trading on a price-earnings ratio of 7.7 times, versus a sector average of 7.6 times and a price-NAV ratio of 1.68 times compared to the sector's 1.52 times, it sees "scope for upside on an absolute basis." 

The broker increased its target price to 1,200p and moved to an 'add' recommendation from a 'hold'.

Shares in Galliford Try were 0.4% down at 1,098p in mid-morning trade.

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