Lendlease Group

LLC Inks Agreement with Google To Build Mixed-Use Developments: Lendlease Group (ASX: LLC) is a leading international property and infrastructure group, with around 13K employees across operations in Australia, Asia, Europe and the Americas. The company recently announced that it has entered into an agreement with Google in the US for the next 10-15 years to jointly develop the company’s landholdings in San Jose, Sunnyvale and Mountain View into mixed-use communities. LLC has estimated that it will develop up to 15 Mn square feet of residential, retail, hospitality and other associated community uses in the new neighbourhoods, whereas Google will focus on developing its office space within these mixed communities. This development is expected to help LLC in delivering two important objectives, i.e., to accelerate the production of residential units in the Bay Area and execute its plan to build mixed-use developments.

H1FY19 (ended on December 31, 2018) Key Highlights: During the six months ended 31 December 2018, revenue from contracts with customers stood at $7,679.7 million, reporting a decline of 11.04% on pcp. During the period, profit after tax attributable to securityholders amounted to $15.7million as compared to 1HFY18 profit of $425.6 million. During the period, Group EBITDA was reported at $83.1 million. EBITDA for the period was impacted by underperforming projects in engineering and services business. EBITDA, for the investments segment, stood at $273.2 million and for the Development segment stood at $260.8 million.


H1FY19 Income Statement (Source: Company Reports)

Global Trends: By 2030, over60% of the world’s population is expected to live in urban areas. Global infrastructure spending is estimated at an average of US$5.1 trillion per year till 2035.Global assets under management are forecast to rise from US$85 trillion in 2016 to US$145 trillion by 2025. Internationally, people aged 60+ are projected to grow three times faster than the overall population (2.4% vs. 0.8% pa) in average annual terms between 2015 and 2050. Global venture capital investment in real estate technology has grown from US$1.8bn in 2015 to US$12.6bn in 2017.

What to expect from LLC: Lendlease’s development pipeline grew to $74.5 billion during the half, including $59.3 billion from urbanisation projects. Construction backlog revenue for the Building businesses stands at $14.8 billion with an additional around $10 billion of preferred work at 31 December 2018. The Investments segment is in a solid position to continue to deliver recurring earnings derived from the $3.6 billion of investments, $34.1 billion in FUM, and $26.6 billion of assets under management.

Stock Recommendation: Its Cash Cycle for H1FY19 stood at 111.7 days, lower than the industry median of 958.9 days, which implies that the company is managing its asset-liability in an efficient way than its peer group. By looking at its recent agreement with Google and decent fundamentals, we presume that the company has a potential to deliver growth in the long run. Hence, considering the aforesaid facts and current trading level, we recommend a “Buy” rating on the stock at the current market price of $14.770 (up 4.752% on July 18, 2019).
 

CIMIC Group Limited

CIM’s Share Tumbled ~19% On July 18, 2019: CIMIC Group Limited (ASX: CIM) has an engagement in the infrastructure, resources and property markets, where it is involved in construction, mining and mineral processing, public private partnerships (PPP), engineering and other services. The company’s Board recently approved a proposal to conduct a further on-market share buy-back of up to 10% of CIMIC’s fully paid ordinary shares for a period of 12 months commencing on 29 December 2018 (new buy-back). The buy-back will be within the ‘10/12 limit’ permitted by the Corporations Act 2001 (Cth) and therefore does not require shareholder approval.

HY19 Financial Performance: Revenue for the period increased from $6,937.4 Mn in HY18 to $6,955.1 Mn in HY19. The EBITDA increased by 16.9% to $1,023.8 Mn in HY19 from $875.6 Mn in HY18. The NPAT increased by 1.1% to $366.7 Mn in HY19 from $362.8 Mn in HY18, which was well below the market expectations of around 6% to 7%, which led to heavy sell-off in the stock on July 18, 2019.

The Board of Directors declared dividend/distribution of AUD 0.7100, with a record date and payment date of September 12, 2019 and October 3, 2019, respectively.


HY19 Income Statement (Source: Company Reports)

What To Expect: As per the company reports, there is a $60 billion pipeline for construction, mining and services opportunities for the remainder of 2019. This pipeline includes $130 billion of PPP opportunities identified for the remainder of 2019 and beyond. The company has confirmed its FY 2019 NPAT guidance of $790 million-$840 million, subject to the market conditions. This equates to a rise of 1.2% to 7.6% as compared to FY18’s NPAT.

Stock Recommendation: CIMIC’s share generated positive YTD return of 5.33%. Its gross margin, EBITDA margin and net margin for FY18 stood at 42.5%, 11.4% and 5.3%, better than the industry median of 12.9%, 6.2% and 2.7%, respectively. Its ROE for FY18 stood at 27.6%, better than the industry median of 9.9%. It is presently trading close to its 52 weeks low level of $36.030. Hence, considering the aforesaid facts and current trading level, we have a wait and watch stance on the stock at the current market price of $37.090 per share (down 18.982% on July 18, 2019).

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.