We Trim Our U.K. Homebuilder FVEs Following U.K. Corporate Tax Rate U-Turn; Shares Remain Appealing

We lower our fair value estimates for our U.K. homebuilder coverage in the range of 5%-6% with the U.K. government abandoning its prior plan to introduce a range of unfunded and controversial tax cuts. Consequently, the U.K. corporate tax rate is now set to increase as originally planned to 25% in April 2023, up from a current 19%. Therefore, we increase our long-term effective tax rate assumption for our U.K. homebuilder coverage by 6 percentage points to 29%, inclusive of the 4% residential property developer tax, which came into effect in April 2022. Our revised fair value estimates for no-moat Barratt Developments, no-moat Taylor Wimpey, no-moat Persimmon, and no-moat Berkeley Group are GBX 710, GBX 180, GBX 2,400, and GBX 4,700, respectively. We make no change to no-moat Bellway’s fair value estimate of GBX 3,670, having previously incorporated the increase in its effective tax rate into our financial estimates in conjunction with its fiscal 2022 full-year result on Oct. 18, 2022.