Lend Lease levels out

Morgan Stanley analyst John Meredith says deteriorating conditions for Lend Lease’s Australia, Europe, Middle East and Africa construction business is offset by better sales from development projects.

Morgan Stanley analyst John Meredith says deteriorating conditions for Lend Lease’s Australia, Europe, Middle East and Africa construction business is offset by better sales from development projects. Meredith estimates Lend Lease’s 2013 net profit will be $551 million, a 13% increase from $489 million in 2012.

Lend Lease shares have dropped 7.8% since Monday after it said conditions for the company’s Australian, Europe, Middle East and African construction unit “softened” in the first six months of 2013. This will result in “reduced earnings” for such businesses in those regions, the company said.

“We estimate a 10-15% underlying downgrade in Australian construction, which, so far is a combination of project specific provisions and weaker top-line growth,” writes Meredith in a research note. “We expect further pressure will materialise in the 2014 financial year and wonder whether the assumed $25 million restructuring this year, and a further small amount next year, will be sufficient.”

Lend Lease shares closed yesterday up 17 cents, or 2%, to $8.62.

The stock is trading at about 7.9 times 2014 forecast earnings, according to Meredith. He has an “overweight” recommendation on the stock. Meredith says Lend Lease’s 30% stake in Bluewater shopping mall in the UK could fetch the company $771 million

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles