Lendlease: Strategy Shift Surrenders Upside, in Return for Short-Term Gains and Reduced Risk

No-moat Lendlease’s major shift in strategy sacrifices some long-term upside as it exits overseas development and construction in return for near-term catalysts which should unlock value. Lendlease investors have rightly become impatient after a long wait. Catalysts could include an on-market buyback of AUD 500 million or more, AUD 4.5 billion in asset sales (much of it by fiscal 2025), and a simplified business focused on segments in Australia where Lendlease has usually made good returns. Selling its multidecade, incomplete development and construction pipeline leaves value on the table for buyers and prompts a 23% reduction in our fair value estimate to AUD 10. Even so, the securities screen as substantially undervalued.