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(Sharecast News) - Berenberg started coverage of real estate advisor Savills on Wednesday with a 'buy' recommendation and 1,375p price target as it highlighted the company's "misunderstood earnings quality".
"While investor perceptions typically recollect Savills' more cyclical prime residential estate agency business (which now equates to just 12% of group adjusted profit before tax), we believe the market fails to appreciate it has built a highly recurring, less transactional business over recent years, which contributed over 70% of FY25's adjusted PBT," the bank said.
Alongside this, Savills' more cyclical transaction advisory business is currently demonstrating a positive recovery, Berenberg said, as interest rates continue to moderate and global investment volumes rebuild.
"The recently announced transformational acquisition of Eastdil Secured (Eastdil) brings a step change in Savills' growth, enhancing its presence in the US and capital markets advisory, and is set to increase earnings per share by 17% in FY27, based on our forecasts," it said.
"Trading on just a FY27 P/E of 9.0x or 5.2x EV/EBITDA, despite an EPS compound annual growth rate of 15% (FY25- 28), we view the shares as clearly mispriced."
Berenberg said its target price offers 54% upside.
At 1237 BST, the shares were up 1.9% at 912p.
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