Lendlease Group

LLC Details
 
Shares of LLC on a Trading Halt: Lendlease Group (ASX: LLC) is involved in retail property management, asset management and development in the Asia Pacific, Europe, and the Americas. On 28 April 2020, the shares of the company were placed on a voluntary suspension as the release of an announcement is awaited. It was also mentioned that the securities would remain suspended until the pending announcement is made to the market.
 
COVID-19 Update: Recently, the company stated that it has undertaken an equity raising in order to strengthen its balance sheet during the COVID-19 led market uncertainties. In doing so the company has undertaken a fully underwritten institutional placement of $950 million at a fixed price of $9.80 per security. It has also undertaken a non-underwritten Security Purchase Plan (SPP) to eligible security holders of up to $200 million. LLC also stated that given the current uncertainty owing to coronavirus led crisis, it is taking necessary measures to ensure the health and wellbeing of its people.The company has reduced all non-essential capital expenditure and project expenditure during the crisis.
 
1HFY20 Key Financial Highlights: During 1HFY20, the company reported revenues from contracts with customers of $5,648 million, as compared to $6,155 million reported in the year-ago period.LLC witnessed significant growth in its urbanisation pipeline. The company also completed another world class urban precinct and made progress in the sale of the Engineering business. LLC reported core business profit after tax amounting to $308 million, which helped the company in generating a return on equity of 9.6%.
 
 

Key Highlights (Source: Company Reports)
 
What to Expect: Going forward, LLC is expecting commercial and residential conversion opportunities throughout its major urbanisation projects. The company remains on track to deploy its core strategy in the integrated business model in targeted gateway cities.LLC continues to expand its exposure to investments and funds under management. Further, focus of LLC revolves around driving value for shareholders and maintaining a strong financial position along with robust capital partner relationships. 
 
Stock Details: The stock of LLC has corrected by ~41.92% in the last three months, whereas it has run up 12.07% in the last one month.As on 28 April 2020, the market capitalization of the company stood at $6.03 billion, with outstanding shares of ~564.79 million.At the closing price of $10.68, annual dividend yield for the stock stands at 5.62%, with a P/E multiple of 7.85x.  The stock will remain in a trading halt until the earlier of the commencement of normal trading on 30 April 2020 or when the pending announcement is made to the market. The stock last traded at the market price of $10.68 per share.

 
LLC Daily Technical Chart (Source: Thomson Reuters)
 
 

Worley Limited

 

WOR Details
 
Business Update Amid COVID-19 Crisis: Worley Limited (ASX: WOR) is engaged in providing professional services to assist customers meet the changing energy, chemicals and resources needs. As on 28 April 2020, the market capitalisation of the company stood at ~$3.64 billion. Recently, the company provided an update, wherein it is delivering projects and offering services to help its customers to permit office-based people working from home. The company is also taking the necessary measures to adjust both operational and support cost structures. It has also suspended all non-essential capital expenditure. The company has proactively negotiated its working capital facilities and has received bank credit approval to extend around $480 million of those facilities for 12 months. Since that date, the company has secured an additional $465 million in 12-month facilities. As at 31^st December 2019, the company had a total liquidity of $1.36 billion. 
 
Other Recent Updates: On 31 March 2020, WOR stated that it has been awarded two contracts by Shell Global Solutions International BV for PT Pertamina EP Cepu’s (PEPC) new sulfuric acid plant in Indonesia. In another update, the company stated that it has also been awarded a contract by PT Enviromate Technology International for PT Pertamina EP Cepu’s (PEPC) new sulfuric acid plant in Indonesia. Also, WOR was awarded a two-year extension to an existing services contract with Chevron Australia Pty Ltd. 
 
1HFY20 Key Highlights: The company in its interim results for the period ended 31^st December 2019, reported improved financial performance and realised benefits of ECR acquisition. During the period, aggregated revenue of the company stood at $5,998 million, up a whopping 134%, whereas underlying EBITA was $366 million, up by 126% on pcp. 
 

Revenue and EBITA growth (Source: Company Reports)
 
What to Expect: The continued strength of market conditions owing to growth in backlog provides expanded opportunities for growth. Going forward, the company is focused on delivering the benefits of the acquisition of ECR including the realization of cost, margin and revenue synergies.
 
Valuation Methodology: Price to Earnings Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Relative Valuation (Source: Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: As per ASX, the stock of WOR has corrected ~54.84% in the last three months, whereas it has run up 20.90% in the last one month.At the closing price of $7.02, annual dividend yield for the stock stands at 5.71%, with P/E ratio of 20.17x.We have valued the stock using P/E multiple based illustrative relative valuation method and arrived at a target price with an upside of lower double-digit (in percentage terms). For the purpose, we have taken peers like Beach Energy Ltd (ASX: BPT), Senex Energy Ltd (ASX: SXY) and CIMIC Group Limited (ASX: CIM). Considering the company’s decent H1FY20 results, synergies expected from ECR acquisition, strong balance sheet, and current trading levels, we give a “Buy” recommendation on the stock at the current market price of $7.02, up 0.286% as on 28 April 2020.

 
WOR Daily Technical Chart (Source: Thomson Reuters)

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