Lendlease Group

LLC Details

Declared Final Dividend: Lendlease Group (ASX: LLC) operates in retail property management, asset management, development and investment in Australia, Asia, Europe, and the Americas. Recently, the company has announced a final fully franked dividend of $0.120 per share with a record date of 23 August 2021 and a payment date of 15 September 2021.

FY21 Financial Highlights:

• The company has recorded a decline in its revenue from contracts with customers to $9,771 million in FY21, compared to $11,671 million in FY20, due to weak demand and lower rents during the COVID-19 outbreak.
• However, the company has incurred a profit of $222 million in FY21 against a loss of $310 million in FY20, driven by non-core segment and property revaluations in the Investments segment.
• LLC has reported an improvement in Operating EBITDA by 34% to $757 million in FY21 against $565 million in FY20.
• The cash and cash equivalent of the company is $1,662 million as of 30 June 2021.

Cash and Cash Equivalent (Source: Analysis by Kalkine Group)

Key Risks:

• Impact of COVID-19 pandemic- The company is exposed to the risk associated with COVID-19 pandemic as it could impact its operations.
• Demand Risk- The economic slowdown has weakened the demand that impacted new project launches. The company is expecting the effect to persist into FY22.

Outlook: The company has anticipated a ROIC target of 10-13%, and ROE target of 8-11% and over $8 billion productions by FY24, focusing on the core business and quality of the portfolio. The company expects restructuring charge of $130m to $170m in H1FY22 statutory profit.

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: The stock of LLC is trading below its average 52-weeks' levels of $10.370-$14.890. The stock of LLC gave a positive return of ~0.25% in the past one year and a negative return of ~2.05% in the past one month. 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 might trade at some premium to its peers' average P/E multiple (NTM trading multiple), considering the strong cash balance and surge in profits from the investments segment. For the purpose of valuation, peers such as Integrated Goodman Group (ASX: GMG), Lifestyle Communities Ltd (ASX: LIC), ALE Property Group (ASX: LEP) have been considered. Considering the current trading levels, indicative upside in valuation, decent balance sheet, government stimulus measures, optimistic outlook, we recommend a ‘Buy' rating on the stock at the current market price of $11.890, as on 1 September 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

LLC Daily Technical Chart, Data Source: REFINITIV

Austal Limited

ASB Details

Final Dividend Declared: Austal Limited (ASX: ASB) operates in ship designing, manufacturing, and commercialising to defence customers globally. The company also provides life capability management and vessel support services, such as crew training and instruction and integrated logistics support. As per a recent update, the company has declared a final dividend of $0.040 with a record date of 9 September 2021 and a pay date of 21 September 2021.

Q4FY21 and Q1FY22 Financial Performance:

• The company has reported a YoY decline of 24.6% in revenue to $1.572 billion in FY21, compared to $2.806 billion in FY20, driven by less favourable foreign exchange translation, COVID-19 impacts and reduced support activities in the USA.
• Austral has reported a decreased EBITDA of $160.326 million in FY21 against $176.139 million in FY20.
• Additionally, the company has incurred a decline in its net profit by 9% to $81.1 million in FY21 versus $88.978 million in FY20 due to global economic volatility and financial impact on customers.
• The cash position of the company stood at $346.89 million as of 30 June 2021.

Cash and Cash Equivalent (Source: Analysis by Kalkine Group)

Key Risks:

• Impact of COVID-19 pandemic- The company has faced challenges in its operations due to COVID-19 that has impacted the volume and delays in contracted work.
• Foreign Currency Risk- The company’s operations are exposed to the global market, due to which the company could face the foreign currency risk.

Outlook:

• The company is focused on new steel shipbuilding facilities that enable steel vessel construction to commence from April 2022.
• The company is expecting a rise in demand for commercial maritime transport as nexus operations are increasing the importance of the Indo-Pacific region.
• ASB has strategized its priorities by expanding its shipbuilding capabilities, enhance the system, extend its support and sustainment services.

Valuation Methodology: EV/Sales 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: As per a recent update, the company has successfully collaborated with the local defence industry and the Australian government for $126 million to develop sovereign capabilities. The stock of ASB is trading below its average 52-weeks' levels of $1.890-$3.545. The stock of ASB gave a negative return of ~6.97% in the past one week and a negative return of ~43.25% in the past one year. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers' average EV/Sales (NTM trading multiple), considering the uncertainty over the COVID-19 impact and increase in debt-to-Equity Ratio. For the purpose of valuation, peers such as Quickstep Holdings Ltd (ASX: QHL), Monadelphous Group Ltd (ASX: MND), NRW Holdings Ltd (ASX: NWH) have been considered. Considering the current trading levels, indicative upside in valuation, decent balance sheet, strategic collaboration, expanding its footprint, optimistic outlook, we recommend a ‘Buy' rating on the stock at the current market price of $1.935, as on 1 September 2021, 11:14 AM (GMT+10), Sydney, Eastern Australia.

ASB 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 on 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 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 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.

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