Lifestyle Communities Limited

LIC Details

Home Settlement Forecast:

Lifestyle Communities Limited (ASX: LIC) operates in GICS – Real Estate development sector and focuses on providing affordable housing options in Australia by owning, building, and operating leases.

• LIC issues an update on delivery of 390 to 405 new home units and 140 to 150 resale units in FY22. Currently as of April 2022 company has already sold or stood by settlements of 322 units, which increased from 252 as of 31^st Dec 2021.
• The company aims to deliver 1,100 to 1,300 new home settlements and 450 to 550 resale settlements between period FY22-FY24. LIC reports a portfolio of 5,231 home sites under which 2,958 are already occupied.

Business updates (Source: Analysis by Kalkine Group)

Key Risks:

• The business could be affected by an unexpected future event like sudden changing in macroeconomic factors which could have a material impact on the company’s business.
• Supply chain risk could threaten LIC profitability if there was any shortage of building material in future.

Outlook: A predicted increase in home settlement by FY22-24 can be the critical driver for LIC to continue its growth journey. The company also establishes a strong relationship with suppliers to tackle supply chain risk in advance. These factors are expected to lead to a robust future prospect.

Valuation Methodology: EV/EBITDA 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 LIC is trading below its 52-week low-high average of $11.43 - $23.85, respectively. The stock has been corrected by ~6.50% in the past month. The stock of the company has been valued using the EV/EBITDA multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight premium compared to its peers, consideration the surging revenue and NPAT, positive margins, probable two to three new sites acquisition per years, etc. For the purpose of valuation a few peers like Centuria Industrial Reit (ASX: CIP), Dexus (ASX: DXS), Arena Reit No 1 (ASX: ARF), and others have been considered which comes under which comes under REIT sector. Considering the indicative upside in the valuation, future growth prospects in the long run, upcoming home settlements, higher margins compared to industry average, current trading levels and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of $14.52, down by ~0.411% as of 18 May 2022.

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

LIC 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 for 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 a 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 price

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