Lendlease, the big international and domestic property developer (does investments, development, construction) out with a major shift in strategy.

Lendlease have not “chosen” this, rather, fed up investors disappointed with outcomes to date have forced it upon them.

The basic gist is that LLC’s overseas expansions have largely failed, with over $4bn in invested capital that simply is not generating a return. Complexity, oversight, governance, scale, expertise and “the cycle” all seem to be part of why the expansion has underperformed.

So, what will LLC do? Unwind it all. The below is exactly what investors are after.

You might wonder, won’t LLC be a much smaller business, now, selling off all these assets and thus a less attractive investment proposition? Well, yes, in that LLC won’t get to $15/sh, which we thought it might if those international opportunities paid off. But largely no, in the sense that the international activities were essentially loss making.

The release of the invested capital is at least in the order of some $3 share, which is some 40% of the current share price.

Returns should improve, profits stay the same, complexity declines, and management should have an easier time managing what’s left.

Thus the multiple applied to the remaining earnings could broadly increase, alongside these capital returns.

Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.

This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

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