This report is an updated version of the report published on 04 October 2023 at 08:04 AM GMT +1.

Section 1.0. UK Real Estate Sector Landscape, Trends & SWOT Analysis

Section 1.1. UK Real Estate Sector Landscape

The Real Estate market in the UK encapsulates list of companies focused on buying and selling of own real estate, renting, and operating own or leased real estate and fee-based real estate services on a contract basis. Moreover, the overall industry can be bifurcated into two broader sub-sectors such as residential real estate and commercial real estate. Residential Real Estate encapsulates activities such as selling, renting, and buying diverse categories of residential properties. Furthermore, the Commercial real estate process is considered one of the vital indicators to track the performance of the economy. Kalkine’s Sector Report covers the Investment Summary, Sector Landscape, Trends & SWOT Analysis, Risks, Recent Business Updates along with the Valuation, Target Price, and Recommendation on the stock.

According to the latest data released by the Bank of England, only 45,400 mortgages got approved for house purchase in August 2023. Nonetheless, the recent increase in consumer confidence could fuel up the demand after several months of downturn.

According to the data from the Office for National Statistics, the average house price in the UK stood at £289,824 for July 2023, and the index remained around 152.0. The property prices went up by 0.5% in July 2023 compared to the previous month, and risen by 0.6% compared to the previous year.

Section 1.2. Trends in the Real Estate Sector

Section 1.3. SWOT Analysis

Section 2.0. Sector Risks & Opportunities

Section 2.1. Risk Exposures to UK Real Estate Sector

Section 2.2. UK Real Estate Sector Outlook

According to the data released by Nationwide Building Society, the UK house prices have shown an YoY drop of around 5.3% in September 2023. Moreover, the month-on-month drop was 0.8% to £257,808 in September 2023. The UK house prices have witnessed a significant correction over the recent months as the Bank of England has raised interest rates sharply to counter inflation triggered by disruption caused from Russia’s invasion of Ukraine and Covid-19 pandemic. The data from Halifax also depicts a similar pattern as prices had fallen 4.6% YoY, or 1.9% MoM during August 2023. However, the Property website Rightmove’s data for September shows signs of optimism as average asking prices for homes rose 0.4% when compared with the prior month. Overall, the UK house prices are expected to recover in Autumn after showing massive correction in Summer 2023 boosted by improved consumer confidence and slowdown witnessed in UK inflation.

After gaining insights into the Real Estate sector, we should look at the business model of two relevant players listed on the London Stock Exchange.

Section 3.0. Vistry Group PLC (LSE: VTY) (‘Buy’ at GBX 831.50, closing price as of 03 October 2023)

3.1 Company Details

3.2. Key Metrics in Pictures

3.3 Valuation and Technical Guidance

Section 4.0: Victorian Plumbing Group PLC (LSE: VIC) (‘Speculative Buy’ at GBX 90.30, closing price as on 03 October 2023)

4.1 Company Details

4.2. Key Metrics in Pictures

4.3 Valuation and Technical Guidance

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is 03 October 2023. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/ or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 6: Dividend Yield may vary as per the stock price movement.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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