Lendlease Group

LLC Details

Change in Substantial Holdings: Lendlease Group (ASX: LLC) is an integrated real estate and investment group mainly involved in the investment, development, and construction of infrastructure and properties. On 17 December 2021, State Street Corporation increased its holding in the company from 5.08% to 6.12%. State Street Corporation now holds around ~42,178,224 ordinary shares of the company.

2021 AGM Highlights: On 12 November 2021, LLC held its 2021 Annual General Meeting (AGM), wherein, the management highlighted that in FY21 LLC reported core operating profit of $377 million, up substantially from $206 million in FY20.

• Distribution Update: For FY21, the company has paid a full year distribution of 27 cents per security, reflecting a payout ratio of 49%, which is within the Board’s stated target range of 40% to 60% of core operating earnings.
• Rise in Work in Progress: During the year, the company’s Work in Progress, the lead indicator for future development production, increased by more than $2 billion to $14.5 billion.
• Cash Balance Update: At the end of FY21, the company has cash and cash equivalents of $1.7 billion, and a gearing ratio of 5.0%.

Key Risks:

• COVID-19 Uncertainties: The company is exposed to the risk related to the uncertainties surrounding the COVID-19 pandemic and associated restriction, which could impact the company’s financials.
• Regulatory Risk: LLC is exposed to a more complex regulatory environment; any failure in compliance could lead the business to fines, penalties, etc.

Outlook: Despite the challenges associated with COVID-19 pandemic, the company is optimistic on the medium to long term outlook. The company believes that it is well positioned to achieve improved returns as operating conditions recover, with its Return on Equity target range expected to be met by FY24.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative) 

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: Over the last six months, the stock has been corrected by ~8.96% and is trading below its 52-week low-high average of $10.080 - $13.800, respectively. The stock has been valued using a P/E multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers’ median P/E multiple, considering the COVID-19 disruptions and the current volatility in the industry. For the purpose of valuation, peers such as Goodman Group (ASX: GMG), Arena Reit No 1 (ASX: ARF), and National Storage Reit (ASX: NSR) have been considered. Considering the rise in core operating profit, modest outlook, expected upside in valuation, current trading levels and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $10.540 as on 7 January 2022, 1:30 PM, (GMT+10), Sydney, Eastern Australia.

LLC Daily Technical Chart, Data Source: REFINITIV  

Cedar Woods Properties Limited

CWP Details

Change of Director’s Interest: Cedar Woods Properties Limited (ASX: CWP) is a property company with projects in Western Australian, Victoria, Queensland and South Australia. On 22 December 2021, one of the company’s Directors, William G Hames, who holds direct and indirect interest in the company, acquired 6,903 ordinary shares of the company at a price of $5.4 per share via on-market trade.

Extension of Corporate Finance Facility: In November 2021, the company significantly expanded its portfolio with the $49.5 million acquisition of an 86-hectare site in Eglinton, adding over 1,200 lots to Cedar Woods’ development pipeline. In order to support its expanded operations, the company has recently increased its corporate finance facility limit by $95 million to $300 million and extended the three-year component of the facility to January 2025. The company also informed about the extension of five-year component of the facility to January 2027.

2021 AGM Highlights: On 3^rd November 2021, CWP held its 2021 Annual General Meeting (AGM), wherein, the management highlighted that the company is now concentrating on acquisition prospects that can deliver sustained growth by adding to earnings from FY25. Some of the other key highlights of FY21 are as follows:

• Rise in Dividend: For FY21, the company has paid fully franked dividends of 26.5 cents, up 39% on the previous year.
• Rise in Profitability: For FY21, the company reported a net profit after tax of $32.8 million, up 61% on the previous year. The company’s earnings per share grew by 60% to 40.7 cents per share.
• Q1FY22 Update: For Q1FY22, the company reported presales of $460 million, up 39% on prior corresponding period (pcp).

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• COVID-19 Uncertainties: The company is also exposed to the risks related to the COVID-19 restrictions, as it could delay the company’s projects.
• Property Cycle Risk: The Company is also exposed to the property cycles in the metropolitan markets in which it operates. Demand fluctuations in these markets represent a risk to achieving the Company’s financial objectives

Outlook: The addition of 1,200 lots to Cedar Woods’ development pipeline is expected to contribute to the company’s earnings over 11 years from FY24. In FY22, the company expects strong earnings growth, underpinned by decent demand across the company's geographies & product types.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last six months, the stock has been corrected by ~18.28% and is trading lower than the average 52-week price level band of $5.04 - $7.70. The stock has been valued using P/E multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers, considering the uncertainties surrounding COVID-19 restrictions, and fluctuations in demand in property markets. For the valuation, peers such as Sunland Group Ltd (ASX: SDG), Goodman Group (ASX: GMG), Vicinity Centres (ASX: VCX), etc. have been considered. Considering the company’s decent performance in FY21, rise in dividend, expanded operations, current trading level, indicative upside in valuation, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the current market price of $5.47 as on 7 January 2022, 12:30 PM, (GMT+10), Sydney, Eastern Australia.

CWP Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and is subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.