LLC

The Lendlease result is out.

Overall, it might seem that there’s little to get too excited about.

However, after years of shrinking to greatness, it might just be starting to turn the corner. It feels like tempting fate to even put it out there.

Investments starting to grow, as FUM/AUM growth continues, non-core bleed/wind-up/sell-down/exit mostly finished, pandemic related delays to project starts/execution perhaps (!) moderating.

The result was modestly ahead of expectations, with Core earnings at $276, vs $240 expected, with plenty of moving parts, which make it hard to know how meaningful (i.e. bankable) the beat was. In any case the guidance outlook flagged weaker margins, with the market seemingly taking it as a wash.

Gearing remains at broadly sound levels, given the sizeable development pipeline.

That guidance didn’t seem as optimistic as their own 2H recovery, mind you, so, for a stock that has been a serial disappointment, a “next year” outcome in perpetuity, one doesn’t want to over extrapolate anything.

We own LLC as a fairly long dated play on an improved return outcome, one in which LLC move group ROE’s to the target outlined below (8-11% range).

If LLC can do that, the stock can broadly double from here. Given work already won, given the development pipeline in hand, and the size of assets under management, all LLC have to do is execute.

But, that has always been the challenge. At current valuations, we feel fairly compensated for those risks.

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