Berkeley Group Shares Now a Buy After 14% Decline in Last 12 Months

UBS upgraded Berkeley Group Holdings (LON: BKG) from Neutral to Buy in a note Monday, telling investors that the stock has a compelling valuation following a 14% decline over the past year. 

The bank has set a new price target of 4,965p, down from its previous target of 5,385p.

UBS analysts highlighted that Berkeley shares are now trading at 1.1 times price-to-tangible net asset value (P/TNAV), well below the long-term average of 1.5 times. 

“We think this offers protection in the short-term especially given high earnings visibility,” they wrote, pointing to the developer’s guidance of at least £975 million in pre-tax profit across FY25 and FY26.

The bank argues that the market is pricing in a too bearish scenario, estimating that the current share price implies a fall in annual EBIT to around £430 million in perpetuity. 

UBS, however, remains more optimistic, modelling a stable EBIT of £500 million for the next four years, with a gradual rise to £600 million over the medium term.

UBS also sees value in Berkeley’s Build to Rent (BTR) strategy, which some investors view as a drag. “We think the BTR portfolio could create value and value it at 120p/share on a NPV basis,” the analysts wrote.

The bank believes the stock is trading 15% below even its conservative estimate of Berkeley’s liquidation value, reinforcing its view that downside risk is already priced in.

Berkeley shares are up around 4% year-to-date and down nearly 14% over the last 12 months.