Savills shares look undervalued after robust trading update, says Peel Hunt

Peel Hunt reiterated a 'buy' rating and 1,400p target price on Savills after an AGM update showed trading running marginally ahead of board expectations. The broker highlighted that the shares are down 16% year to date and now trade at about 9x forecast 2026 earnings and roughly 5x EV/EBITDA. The update is supportive but incremental, suggesting modest upside rather than a major catalyst.

Analysis

The market is still pricing Savills like a cyclical laggard, but the setup is more interesting than a simple “cheap property stock” rerate. At ~5x EV/EBITDA and ~9x forward earnings, the equity is effectively discounting little/no operating leverage from even modestly better transactional activity; that creates asymmetric upside if management’s “marginally ahead” tone proves to be an early read on a broader recovery in leasing, capital markets, and valuation work. The key second-order effect is that property services tends to inflect before headline housing data, so this is more a leading indicator than a coincident one.

The bigger competitive implication is that smaller or more leveraged brokers/consultants likely feel the pressure first if volume remains soft: Savills can defend share through breadth of service lines and balance-sheet resilience, while weaker peers may need to discount fees or cut headcount harder, preserving Savills’ margin structure. If that happens, the earnings leverage is not linear — even low-single-digit revenue improvement can drive disproportionately higher profit conversion over the next 2-3 reporting cycles as fixed costs are spread across a steadier fee base.

The contrarian read is that the market may be underestimating duration rather than direction. A small beat today does not guarantee a full-cycle recovery; transaction markets can stay “better but not good” for several quarters, which is enough to trap value investors unless the shares re-rate on sustained evidence. The main risk is that a lower-rate backdrop takes longer to translate into capital markets activity than bulls expect, delaying the multiple expansion until 2025-26 rather than the next few months.

Key Decisions for Investors

• Long SVS on weakness over the next 1-4 weeks; target a 15-20% rerating if the market begins to price in a cyclical recovery, with downside limited if the stock continues to trade near 9x forward earnings.
• Pair trade: long SVS / short a more leveraged or fee-sensitive property-services peer basket for 3-6 months; thesis is that Savills’ diversified revenue base and balance sheet should outperform if the market remains choppy.
• Use call spreads rather than outright equity for the next catalyst window: buy 3-6 month SVS upside exposure to capture rerating optionality while defining risk if the AGM tone proves transitory.
• If transaction data or management commentary weakens over the next quarter, trim quickly: the stock’s low multiple can stay low for a long time absent clear evidence of sustained volume recovery.