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02 Dec 2020
The 2021 Lightside playbook
Compagnie de Saint-Gobain SA (SGO:PAR), 0 | Wienerberger AG (WIE:WBO), 0 | Sika AG (SIKA:SWX), 0 | Ferguson Plc (FERG:LON), 16,950 | Travis Perkins plc (TPK:LON), 712 | Geberit AG (GEBN:SWX), 0 | Kingspan Group Plc (KRX:DUB), 0 | ROCKWOOL A/S Class B (ROCK.B:CSE), 0 | Armstrong World Industries, Inc. (AWI:NYS), 0 | Trex Company, Inc. (TREX:NYS), 0 | Owens Corning (OC:NYS), 0 | Ibstock Plc (IBST:LON), 147 | Forterra Plc (FORT:LON), 154
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The 2021 Lightside playbook
Compagnie de Saint-Gobain SA (SGO:PAR), 0 | Wienerberger AG (WIE:WBO), 0 | Sika AG (SIKA:SWX), 0 | Ferguson Plc (FERG:LON), 16,950 | Travis Perkins plc (TPK:LON), 712 | Geberit AG (GEBN:SWX), 0 | Kingspan Group Plc (KRX:DUB), 0 | ROCKWOOL A/S Class B (ROCK.B:CSE), 0 | Armstrong World Industries, Inc. (AWI:NYS), 0 | Trex Company, Inc. (TREX:NYS), 0 | Owens Corning (OC:NYS), 0 | Ibstock Plc (IBST:LON), 147 | Forterra Plc (FORT:LON), 154
- Published:
02 Dec 2020 -
Author:
Bromehead Yves YB | Roger Paul PR | Speak George GS | Whitworth Robert RW -
Pages:
127
While the pandemic continues to weigh on construction markets, we do see reasons for optimism: 1) the US Eldorado; 2) EU renovation stimulus programmes; 3) pricing power across value-added solutions; and 4) surge in MandA activity.
The 2021 lightside playbook
As we approach the end of this anomalous year, we cast our sights to 2021, where three major themes could come into play: 1) the US to be an Eldorado, 2) the renovation wave, 3) MandA spree.
Buy US Eldorado names = FERG and OC
Leading indicators have hardly ever looked as bright, leaving the US new-housing and RMI sector poised to reach record-high levels in 2021 and support pricing power in-turn. OC is our top-pick to play US housing. Ferguson also screens well - we upgrade to Outperform.
Buy EU renovation and turnaround stories = SGO, GEBN, TPK
The market still has doubts on trade ideas to play the EU renovation wave. We agree it won''t be a linear trajectory but fiscal stimulus programmes are secured and delivering incremental growth opportunities across Europe. Saint-Gobain, Geberit and Travis Perkins are best positioned in our view.
Buy MandA initiators = KSP, SIKA
After a quiet year on the MandA front, the sector could unleash its deep-pockets and EUR20bn of firepower, particularly across renovation end-markets and valued-added solutions. Sika and Kingspan (raised to +) are likely to drive this theme.
Be on your guard with Europe new-residential market = IBST, FORT, WIE
The impact of the pandemic is still unknown with lockdown 2.0 likely to further weaken housing permits. Brick names have rerated on vaccine hopes and prospects of Brexit risk easing; we take profit and downgrade IBST and FORT to Neutral.