Clouds gather over residential
property development in France
Despite housing shortages in France, household solvency is
declining and demand is waning. We expect sales of new
French housing units to contract 43% by 2010. Developers
are adjusting their supplies and construction starts are
shrinking. We expect a 12% drop in housing prices over the
next three years to squeeze property developers’ margins.
Initiating coverage of three stocks
Pure residential property players Kaufman & Broad (Neutral
(V), target price EUR32.5) and LNC (Neutral (V), target
price EUR4.1) are feeling the full force of the market
downturn, as their diversification efforts currently contribute
too little to the bottom line to offset the slump.
We prefer Nexity (Overweight (V), target price EUR21),
which has a healthy balance sheet and better earnings
visibility. The group is the leading company in France’s real
estate development market with an 8.6% share of market
sales in 2007, and we believe its ability to offer customers a
comprehensive package via an extended distribution network
and a wide range of services and financing solutions could
make all the difference in a slumping market. Its integrated
business model is more resilient than those of
Kaufman & Broad or LNC and is able to smooth the
market’s cyclical effects. However, balance sheets being
dragged down by the housing market slump, depressed share
prices and limited free floats could lead the controlling
shareholders of Kaufman & Broad and LNC to consider
withdrawing the companies from the stock market. We
would expect such delisting moves could buoy share prices
in the short term.

What are the prospects for property developers stocks? 3
Valuation and risks 7
Clouds gather over residential property development in France 11
Which strategy will win? 19
Companies 23
Kaufman & Broad 24
Les Nouveaux Constructeurs 33
Nexity 42
Appendices 52
Overview of French residential property developers 53
Tax incentives lose steam 56
Statistics 58
Disclosure appendix 63
Disclaimer 67

[此贴子已经被作者于2009-1-27 11:55:40编辑过]