Is Lendlease Group (ASX:LLC) Undervalued On Its Brisbane Exhibition Place Opening?

Lendlease Group (ASX:LLC) is back in focus after completing its Exhibition Place build to rent tower in Brisbane, with residents now moving in and investors reassessing the development pipeline.

The Exhibition Place opening lands after a choppy run for Lendlease Group’s equity, with the stock posting a 9.17% 7 day share price return but remaining down 51.55% on a year to date share price basis and showing multi year total shareholder returns that are also deeply negative. Recent gains around the Brisbane project hint that investors are warming slightly to signs of execution in the development pipeline, even as the longer term total shareholder return record keeps risk perceptions elevated.

Scan beyond Lendlease Group and the Exhibition Place headlines by weighing it up against 4 high quality undervalued stocks, which also pair active project pipelines with balance sheets the market may be underpricing.

Bulls see the Brisbane delivery and deep share price fall as the start of a reset. Bears point to losses and weak long term returns. Which case do the current valuation markers lean toward next?

Most Popular Narrative: 4% Overvalued

Lendlease Group closed at A$2.50, while the most-followed narrative on the stock pegs fair value closer to A$2.40. This tilts the story toward a modest premium despite the headline discount to asset backing.

Lendlease looks cheap relative to its reported asset value, but at $2.80 I don’t think the discount is yet wide enough to compensate for the leverage, execution risk and time required to realise that value.

For me, LLC is currently a watchlist, not a buy.

See why 3 investors see Lendlease Group as 4% overvalued.

Result: Fair Value of A$2.40 (OVERVALUED)

Still, the narrative could unravel quickly if Lendlease Group’s A$3.7b net debt stays elevated or the A$2.5b CRU portfolio suffers further write downs.

Find out about the key risks to this Lendlease Group narrative.

Another View On Lendlease Group’s Value

That user narrative leans toward Lendlease Group being slightly overvalued around A$2.50 to A$2.80, even with a large reported net tangible asset buffer. The market’s own yardstick sends a different message. On price to sales, LLC trades at 0.3x compared with 2.6x for the global real estate industry and 3.4x for close peers, while the fair ratio for the stock is 1.1x.

Put simply, investors are paying far less for each A$1 of revenue at Lendlease Group than for similar businesses, and also far less than the fair ratio the market could move toward. That wide gap can reflect concern about debt, execution and past losses, yet it can also mean sentiment is already pricing in a lot of bad news. The question is whether you see that discount as a warning sign or a potential opening.

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

It may be unclear whether you lean toward caution or optimism after looking at Lendlease Group. Consider acting while sentiment is still split and weigh the 2 key rewards and 2 important warning signs against your own read of the numbers.

Looking for more investment ideas beyond Lendlease Group?

If you only stop at Lendlease Group, you risk missing other opportunities that could fit your goals better across quality, price, and risk.

• Target deep value by scanning the market for companies trading at meaningful discounts to their fundamentals using the 4 high quality undervalued stocks.
• Secure more dependable cash flow candidates by reviewing the 5 dividend fortresses that may offer income potential.
• Focus on resilience by searching for businesses with stronger balance sheets and solid fundamentals through the list of solid balance sheet and fundamentals (12 results).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com