Lendlease Group

LLC Details

Healthy orderbook assures execution pick up in upcoming years: Lendlease Group (ASX: LLC) is a leading international property and infrastructure group. It consists of Lend Lease Corporation Limited and its controlled entities, including Lend Lease Trust. Recently, the company announced buy back of shares in open market and this was payable up to A$500 Mn. The company has reported a solid residential revenue rise of 70% to $443 Mn for 1HFY18, while the Construction backlog revenue declined by 115% YoY to $26.1 Mn. The group’s Funds under Management enhanced by 33% to $383.1 Mn during the same period. EBITDA rose by 13% on the prior corresponding period with growth in Development segment and Investment segment more than offsetting a weaker period for Construction division. PAT amounted to $425.6 Mn in 1HFY18, up by 8% on Year-on-Year basis. EPS was reported at 72.9 cents in 1HFY18 against 67.8 cents, up by 8% while ROE came at about 13.8%. LLC also declared that their interim dividend of 34 cents would be paid on March 22, 2018 basis an ex-dividend date of February 27, 2018. Net operating and investing cash flow stood at $825.2 Mn for first half of the year which is almost double that of PAT. Moreover, the group made further progress in reallocating capital to international operation following the part sale of the retirement living business, growth in international urbanization and launch of a telco infrastructure Joint venture with Softbank Group in the US. The group is laying the foundation for future growth on the back of healthy financials, strong orderbook, and focus on execution through strong risk management and governance framework in years to come.
 

Return on Equity and Dividend Distribution (Source: Company Reports)
 
While LLC’s stock price has recovered recently (up 9.71% in past three months and marginally up by 0.73% in last five days as on March 13, 2018) from the impact of construction impairment of ~$200m for the Australian business, the group has outperformed the REIT sector in terms of its recent result. Though its PE ratio is low and below the REIT sector’s level of about 16x, the construction earnings have been seen to impact group’s profit leading to a valuation differential at a higher end. Thus,given the trading scenario and few headwinds, we believe that the investors can take profits from the stock as we give a “Sell” recommendation at the current market price of $17.60
 

LLC Daily Chart (Source: Thomson Reuters)

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