Stocks’ Details
 

Iress Limited

Announcement of Capital Raising worth $170 Million:Iress Limited (ASX: IRE) is a technology company providing software to the financial services industry. In a recent announcement, the company updated about the completion of a $150 million fully underwritten placement. Under the placement, institutional and sophisticated investors were issued 14.4 million new fully paid ordinary shares at a price of $10.42 per share. Following the placement, eligible shareholders will be offered to participate in a non-underwritten Share Purchase Plan to raise approximately $20 million. The company has recently proposed the acquisition of 100% shares of OneVue through a Scheme of Arrangement, which is expected to be executed in Q32020. This strategic acquisition will enable both parties to combine their strengths in the development of software and services and deliver long-term shareholder value.

Performance Update: The company informed that its year to date performance till April 2020 has been in line with expectations, without a significant impact from COVID-19. YTD revenue amounted to $158.5 million, up 14% in comparison to pcp. Growth in revenue is attributable to underlying growth of 13% in Australian Wealth, 9% in the UK, and contribution from recent acquisitions of QuantHouse and O&M. Segment profit came in at $49.8 million, down 3% on pcp. 


Performance Highlights (Source: Company Reports)
 
Outlook:The company has recently withdrawn the guidance for FY20 due to the uncertainty in the market. The company is preparing itself for the broader economic impacts of COVID-19 and is focused on revenue performance and cost management to keep the situation under control.

Valuation Methodology:EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation:The stock of the company corrected by 4.92% in the last three months. Currently, the stock is trading close to the average of its 52-week trading range of $8.290 - $14.430. The company has a strong business with high levels of recurring revenue and cash conversion. Proceeds from the recent capital raising will be utilised to strengthen the balance sheet and provide flexibility to fund opportunities in the current environment. A part of the proceeds will also be utilised in paying for the acquisition of OneVue. The acquisition is expected to be EPS dilutive in the near term, with significant earnings upside potential. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price with low double-digit upside (in % terms). For the purpose, we have considered peers like Tyro Payments Ltd (ASX: TYR), Bravura Solutions Ltd (ASX: BVS), Link Administration Holdings Ltd (ASX: LNK), etc. Hence, we give a “Buy” recommendation on the stock at the current market price of $11.68, up 4.193% on 2^nd June 2020.

Lendlease Group

Capital Raising Increases Liquidity to $3.95 Billion:Lendlease Group (ASX: LLC) is an international property and infrastructure group, operating in Australia, Europe, the Americas and Asia. The company recently completed a security purchase plan for raising up to $260 million. Earlier, the company had completed a placement of fully paid ordinary stapled securities at a price of $9.8 per share, to institutional investors. The company raised a total of $950 million via the placement. The placement and SPP together raised a total amount of $1.21 billion, which will provide funding support for its $112 billion development pipeline. Moreover, the company will have funds available to capitalise on investment and development opportunities as markets stabilise.

COVID-19 Update: During the period, majority of the company’s projects in the core business have continued to operate in compliance with the social distancing and safety standards. The company reported progress in some near-term conversion opportunities across urbanisation projects.

1HFY20 Highlights: During the half-year ended 31^st December 2019, the company reported a significant growth in its urbanisation pipeline.The company added two new major urbanisation projects to its portfolio, Thamesmead Waterfront in London and a partnership with Google in the San Francisco Bay Area. Funds under management increased by 8% to $37 billion. Core business profit after tax stood at $308 million.


1HFY20 Results (Source: Company Reports)
 
Outlook:In its core business, the company’s profit is dependent on some material transactions in the Development segment which may be delayed. Reduced productivity in the Construction segment is expected to have a short-term impact on core profit. Under the non-core business, the company has paused the sales process of its Services business due to market uncertainty. However, the sale of the engineering business continues to progress. Considering the COVID-19 led uncertainties, the company has withdrawn all forward-looking statements included in HY20 results.

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

P/CF Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation:The stock of the company corrected by 25.86% in the last three months and is currently trading below the average of its 52-week trading range of $9.34 - $19.95. Following the completion of the recent capital raising, the company strengthened its balance sheet position with available liquidity increasing to $3.95 billion. We have valued the stock using P/CF multiple based illustrative relative valuation method and arrived at a target price with low double-digit upside (in % terms). For the purpose, we have considered peers like Vicinity Centres (ASX: VCX), Dexus (ASX: DXS), Charter Hall Group (ASX: CHC), etc. Hence, we give a “Buy” recommendation on the stock at the current market price of $12.96, down 1.295% on 2^nd June 2020.

Vicinity Centres

Supermarket Sales Up by ~22% in March:Vicinity Centres (ASX: VCX) is one of Australia’s leading retail property groups. The company recently notified that it has completed a fully underwritten placement of fully paid new stapled securities, at an offer price of $1.48 per New Security. The Placement raised a total amount of $1,200 million, strengthening the company’s balance sheet and providing additional flexibility to respond to ongoing uncertainties. The company will use the net proceeds to repay debt.

March Quarter Update:In March 2020, the company’s total portfolio sales reduced by 16.5% on pcp. Speciality store and mini majors sales reduced by 31.1%. Supermarket sales increased by 22.2%.During the quarter ended 31^st March 2020, portfolio performance was impacted by government’s initiatives to contain COVID-19. As on 4^th May 2020, 50% of the company’s stores representing 65% of portfolio gross lettable area, were open.


Portfolio Sales (Source: Company Reports)
 
Outlook: The company expects the current challenges to persist for at least the next 12 months and has withdrawn FY20 earnings and distribution guidance. To protect its business, the company has deferred all non-critical capital expenditure, including the proposed redevelopment of Chatswood Chase in Sydney, NSW. 
 
Valuation Methodology:P/E Multiple Based Relative Valuation (Illustrative)

P/E Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation:The stock of the company corrected by 26.48% in the last three months and is currently trading below the average of its 52-week trading range of $0.905 - $2.720. As on 31^st March 2020, the company had cash balances and undrawn facilities of $1.3 billion. We have valued the stock using the P/E multiple based illustrative relative valuation method and arrived at a target price with low double-digit upside (in % terms). For the purpose, we have considered peers like GPT Group (ASX: GPT), Dexus (ASX: DXS), Mirvac Group (ASX: MGR), etc. Hence, we give a “Buy” recommendation on the stock at the current market price of $1.595, down 0.932% on 2^nd June 2020.
 
 
Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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