In its latest report on the Spanish home building sector, Goldman Sachs has chosen AEDAS Homes as its top pick among the three listed peers. In addition to awarding the share price potential growth of 58% and reiterating its recommendation to buy, the investment bank underlined the fact that AEDAS Homes has the highest quality land bank, which will allow it to generate the largest gross margins in the residential sector.
The investment bank pointed out that the company led by CEO David Martínez focuses on developing homes in the Spanish regions with the strongest demand, and that the company purchased land in these areas at very competitive prices prior to the market recovery. These two factors will enable AEDAS Homes to absorb increases in construction costs and thus protect its margins, according to analysts. Accordingly, Goldman Sachs has updated its forecasts, in which it anticipates that AEDAS Homes will be the developer to produce the highest gross margin, predicting a margin of 25% starting in 2019, and 27% in 2022.
Goldman Sachs also reviewed the revaluation of property prices in Spain, qualifying the differences among provinces, which range from a 9% drop in Teruel to a 16% year-on-year increase in Madrid. According to analysts, AEDAS Homes has the highest quality land bank in markets where prices will grow exponentially, and as a result, they predict house price appreciation (HPA) of up to 8% in 2018, 4.3% in 2019, and 3.3% in 2020. Likewise, Goldman Sachs pointed out that AEDAS Homes is the only developer among its peers that has continued to confirm guidance since going public.
The firm's experts also included AEDAS Homes on its special "Pan Europe Conviction Buy List", and it is the only one of the three listed peers to appear. Goldman Sachs reiterated its recommendation to buy and awarded an objective price of 37.77 Euros to AEDAS Homes shares, which equates to potential growth of 58%.
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