LendLease Group

LLC Details
 
FY20 Unaudited Results Update: LendLease Group (ASX: LLC) operates in the Asia Pacific, Europe, and the Americas regions in the areas of retail property management, asset management and development; large scale urban regeneration and greenfield development projects. As on 1 July 2020, the market capitalization of the company stood at ~$8.51 billion. The company has recently released unaudited results for FY20, wherein it stated that the development segment had experienced a delay in the conversion of several opportunities across urbanization projects due to the outbreak of COVID-19. It also reported that it witnessed lower productivity and delays in the commencement or securing of new projects in its international regions. 

Progress in the Core Business: Despite the unprecedented times due to the novel coronavirus, the company made good progress in the core business. The company executed agreements with Mitsubishi Estate, which is likely to contribute ~$100 million in profit after tax in FY21. Other than a small number of projects, the construction projects of the company are operational.

Attractive Investment Proposition: The company has an integrated model delivering long-term securityholder value and has a continued focus on leveraging the group’s competitive advantage across its urbanization and investment platforms. At the end of 1H20, the company had funds under management of $37 billion underpinned by high-quality, long-term capital partner relationships.


Growth in FUM and Investments (Source: Company Reports)



Future Expectations and Guidance: The company is expecting that the performance of the investment segment will be impacted by reductions in valuations across the Investment portfolio. These reductions are likely to impact FY20 core profit after tax in the range of $130 - $160 million. Despite the significant impacts of COVID-19, the group expects FY20 profit after tax for the core business to be between $50 million to $150 million. 

The company has reached pre-COVID-19 levels in Australia, providing a solid platform for growth. LLC also expects to complete the sale of Acciona in early FY21. The company is expecting restructuring costs of approximately $550 million pre-tax and is expecting a statutory loss to be in the range of $230 to $340 million for FY20. Despite the near-term uncertainty, the company seems well-positioned to execute the delivery of the global development pipeline and is likely to enter FY21 in a decent financial position with expected gearing of below 10% and total liquidity above $5 billion. The group will benefit from other investment opportunities in years to come.

Key Risks: LLC’s business is sensitive to the failure in execution of strategy or projects, which may cause delays in achieving corporate objectives. The company’s business is also sensitive to global and local events and shifts in government policy in the regions in which it operates.

Stock Details: As per ASX, the stock of LLC gave a return of 20.57% in the past three months and is inclined towards its 52-weeks’ low price of $9.340. On a TTM basis, the stock is trading at a P/E multiple of 9.29x and has an annual dividend yield of 5.09%. The stock closed at a market price of $12.21, down by 1.293% on 1 July 2020. Despite the short-term headwinds due to the COVID-19 pandemic, long-term outlook for the company remains intact. 

 
LLC Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 
 
 

Temple & Webster Group Limited

TPW Details
 
Increase in Revenue and EBITDA: Temple & Webster Group Ltd (ASX: TPW) is one of the leading online retailers of furniture and homewares in Australia. The company has recently released results for the FY20 second half for FY20 (Till 31 May), wherein it reported a growth of 68% in revenue to $151.7 million and a significant increase of 668% in FY20 EBITDA to $7.1 million. This was mainly due to increased customer demand. In the same time span, active customers of the company went up by 68% to 440,257, and net promoter score has reached record levels of 65% in May 2020. The group is profitable and is cash flow positive. The company had a cash balance of $29.2 million as on 31 May 2020 and retains a strong debt-free balance sheet.  


Financial Highlights (Source: Company Reports)

Equity Raise: The company has launched a fully underwritten institutional placement of $40 million at an offer price of $5.70 per share. The settlement of new shares is likely to be completed on 7 July 2020. This placement will strengthen the company’s balance sheet and fund growth.

Outlook: TPW remains well placed in the furniture and homewares market to benefit from the structural shift from offline to online. The company remains bullish about the longer-term shift driven by changing customer preferences and demographics. It stated that furniture & homewares market is worth $13.9 billion. The company is investing in technology, digital capabilities, private label, and marketing. TPW expects its FY20 EBITDA to be over $8 million. 
Key Risks: Investment in TPW is subject to investment and other known and unknown risks. Events related to the Coronavirus pandemic have resulted in significant market volatility. There is continued uncertainty regarding the likelihood of an Australian economic recession of unknown duration or severity. The ability to transport products between countries is also disrupted and may also impact the supply chain of TPW.

Stock Details: The stock of TPW was placed on a trading halt on 1 July 2020. The stock will remain in a trading halt until the earlier of the commencement of normal trading on 3 July 2020 or when the pending announcement is made to the market in relation to capital raising by way of placement of fully paid ordinary shares to sophisticated and professional investors. The stock last traded at $6.31 per share.

 
TPW Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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