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Redrow's discount looks too harsh

The housebuilder's shares are currently trading at a discount to its NAV and the broader sector
Redrow's discount looks too harsh

There’s a high degree of uncertainty over the near-term future of the UK housing market as we head towards a recession and a potentially sharp rise in unemployment. Coming off the back of the Covid-19 lockdown, housebuilder Redrow’s (RDW) profits are set to deteriorate in the year ending 30 June 2020, with a gradual recovery thereafter. But that weaker outlook seems more than adequately priced into its shares. With a track record of good cost control and improved liquidity, it looks well placed to ride out any pressure on sales prices and transaction volumes that may arise this year.

IC TIP: Buy at 460p
Tip style
Value
Risk rating
High
Timescale
Long Term
Bull points

Shares at discount to NAV

Stamp duty reform boost

Record order book

Forecast return to net cash

Bear points

Expected downturn in sales prices

Potential margin pressure

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