Builders’ shares ‘will rise by 20%’

SHARES in McInerney Holdings are undervalued, according to Dolmen Stockbrokers, who see a 20% rise in value over the next 12 months.

In an up-beat note to clients yesterday, Dolmen said: “McInerney is one of our top picks on the Irish market for the summer. At €4.80 we believe the company is undervalued and offers an attractive entry level.

“We believe that McInerney should trade in line with the UK sector average of 6x earnings. This gives us a 12-month price target of €5.83 (21% upside) which is based on 6.3x 2005 consensus eps of €0.925.”

Dolmen says Ireland remains the key market for McInerney with 969 houses completed in 2003 and 788 deposits in hand at the end of the first quarter in 2004.

“The company held 4,000 plots of land at the end of March 2004, 60% of which already have planning permission. The company has sufficient land bank to satisfy its growth in the medium term. Turnover increased by 7% in the contracting division in 2003, while the commercial division sold 132,500 sq ft of industrial units compared with 19,800 sq ft in 2002,” Dolmen said.

On the risk side, Dolmen believes the predominant risk to McInerney is a slowdown in the housing markets in Ireland and Britain.

“The UK is of particular concern as the Bank of England have already moved to curb both increasing house prices and inflation, raising its base interest rate to 4.25%. We are confident, however, that demand for houses in the UK will not weaken in the next 12 months,” said Dolmen.

McInerney has operations in Ireland, Spain and Britain operating within four divisions. McInerney Construction Ltd, is the company’s housing development division. McInerney Group (UK) comprises William Hargreaves, which specialises in general contracting, in the design and building of projects and The Charlton Group (UK), a property development and construction company. Hillview Securities is engaged in a spectrum of commercial projects.

McInerney Espana SA operates in two areas of the leisure sector. It acts as the management firm overseeing the McInerney resort and Four Seasons Country Club, and is a developer of freehold houses and flats.