Lendlease Shares has been bid slightly lower this year to be down -6% at the time of writing. The Share price was up nearly 15% until the media came out with some news regarding their Melbourne Metro project and then shortly afterward the CFO and longtime CEO resigned. So we take a look and see Should I Buy Lendlease Shares (ASX:LLC) 2021?
About Lendlease Shares 2021
Lendlease is a globally integrated real estate and investment group with core expertise in shaping cities and creating strong and connected communities.
Being bold and innovative characterizes our approach and doing what matters defines our intent.
Headquartered in Sydney, our people are located in four operating regions: Australia, Europe, the Americas and Asia
ASX:LLC Share Price
On the 5-year price performance chart, Lendlease Shares have been relatively sideways moving, however reaching an all-time high back in mid-2019, before falling back down to ~$12.5/share over the proceeding six months.
Today the Lendlease share price is $12.165, which is in the middle of its 52-week range of 10.73-14.89. This is still down around 60% since its peak in 2019. It’s down 5.95% this year. In comparison, the broader market is up 27.56% this year and has fully recovered from the recession pushing it to new heights.
ASX:LLC Shares Dividend History
Lendlease shares typically announce a dividend with the release of its half-yearly results in February and full-year results in August as seen in their financial Corporate Calendar | Investor Centre (lendlease.com). Dividends are typically paid twice a year, in March (interim dividend) and September (final dividend).
Lendlease Group paid dividend of 30c per share on 17 Mar 2020. The ex-dividend date for this dividend was 27 Feb 2020. The dividend amount was paid at franking rate of 0%. Lendlease Group is paying dividends since or before Mar 2010.
The dividend yield of LLC is 1.46%. The dividend yield is defined as the amount of dividend paid divided by the share price. The majority of dividends paid by LLC during this time have either been 0% franked or partly franked.
Lendlease Shares Investor Sentiment
After surveying 197 Investors about their current Lendlease shares sentiment: BUY-HOLD-SELL, as well as their target price over the next 12-months here are the results;
The results from this survey show there is currently a weak bullish investor sentiment on ASX:LLC shares. So how much is ASX:LLC shares worth? Let’s get into it.
Should I Buy Lendlease Shares: Fundamentals
Below we have included the current fundamentals for ASX:LLC. It’s worth keeping in mind that the previous year was out of the typical result for the group.
|PE ratio (TTM)||N/A||Profit margin||-4.21%|
|Price/sales (ttm)||0.82||Price/book (mrq)||1.19|
Looking deeper into the fundamentals there seems to have been a large slowdown of revenue and an even greater drop-off in earnings from FY2019 – FY2020.
Looking at the groups EBIDTA this has taken a substantial impact since reaching all-time highs in 2018 over A$1billion. This seems to be largely attributed to the groups underperforming engineering business projects on the NorthConnex, Kingsford Smith Drive and Gateway Upgrade including what is also looking to face similar circumstances in their Joint Venture on the Melbourne Metro Project.
The underperformance in the engineering business and the uncertainty in the earnings are likely what has triggered the business to sell off its engineering division.
Lendlease Vision for Future Profitability
Lendlease outlined in their strategy update delivered to the market on 31st August 2020 a number of organizational changes to the business. The company seems to be wanting to focus greatly on its fund’s management and city-building expertise. With Lendlease’s exit from their troubled construction arm, selling it to Spanish construction firm Acciona to $180million in 2020.
The group now seems to be focussing on three streams of business moving forwards, Development, Construction, and Investments.
According to the strategy report, this should help to create a more reliable income stream, higher annuity earnings, Programmatic Investments, and a focus on operating income moving forwards.
As we understand it, this means Lendlease will really focus on their city-building projects such as the Barangaroo redevelopment and their mixed neighborhoods in the bay area with Google. It will then use its relationships in the city building space to purchase strategic investments and construct the works at favorable conditions for the company.
ASX:LLC as a Development Arm:
Lendlease highlights the requirement of increasing capital expenditure however also expecting a larger development production from invested capital moving forwards. This is largely due to their renewed focus on city building in massive pipeline communities, where they should be able to get economies of scale due to the size of the developments and favorable operating conditions.
ASX:LLC as an Investment Company
Lendlease is significantly growing its investment arm, from a total Funds under management in FY2010 of A$10billion to a Funds under Management in FY2020 of over A$36billion. The group also seems to have this decently diversified across Australia, Asia, Europe, and the Americas.
The group claims access to high-quality and sustainable institutional investment-grade products from their urbanization pipeline. This link is extremely important with the development arm, as it would enable Lendlease to secure favorable investments from their urbanization projects.
Lendlease Construction Arm:
If the picture here isn’t very clear yet, the future aim of Lendlease can pretty much be summed up in our opinion as an “end-to-end, city builder” (ETECB), where they will secure and redevelop large parcels of land under favorable conditions and contracts. The building division is there to construct these developments, under once again favorable conditions.
The EBIDTA margin on the construction division is typically much lower than their other businesses in investment and development as this is a very traditional business with a large number of players.
Delivery model flexibility for internal development pipeline across gateway cities: Key construction management capability to be controlled in-house with the use of third-party general contractors in selective international gateway cities. Once, again making reference to the three-pronged approach by Lendlease which revolves around these gateway cities.
Departure of the CEO and CFO
On the 26th of November 2020, the group announced the departure of the companies CFO (Tarun Gupta). Tarun will leave the Group. Mr Gupta has accepted the role of Managing Director and Chief Executive Officer of Stockland. Whilst this seems like a logical step for the CFO to take it raises questions when only months later the group’s CEO Steve McCann Announces his resignation.
Steve McCann has since moved on to lead Crown Resorts as their CEO. This only raises the question, that if the CFO was in the know surely he would have been a front runner to step up into Steve’s shoes on a much larger salary than he would be on at Stockland Group.
There may be nothing more around this, however the timing seems a little strange.
Should I Buy Lendlease Shares: Prophet’s Take
Here at Prophet, we believe strongly in the saying Few Bets, Infrequent Bets, Massive Bets in the Stockmarket. We only invest where we see massive upside with very little downside and then we back the truck up and make a massive bet.
Lendlease has been able to maintain a strong balance sheet which has allowed them to function despite sustaining heavy losses from the engineering business. Despite such a challenging environment they have responded well cutting costs and maintaining cash and re-aligning their vision.
At the current prices, we don’t see a massive opportunity in LLC. However, this is likely one that if they can pull off their city building, develop, invest, construct approach, we could see high single to low double-digit growth over the medium to long term.
Prophet will revisit Lendlease shares when the risk surrounding Melbourne Metro Subsides and growth in their city-building strategy can be seen as evident.
Please Remember all Articles Published on Prophet Invest are Opinion only
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