Lendlease: Awful Fiscal 2024 Behind, but We Cut Fair Value 15% on Coverage Transfer to New Analyst

We transfer coverage of no-moat Lendlease and lower our fair value estimate by 15% to AUD 8.50 per security. The reduction follows a review of our longer-term forecasts. We’ve tempered our revenue growth expectations for development and construction, but increased our margin expectations given the business simplification. We’ve also lowered expectations for investment returns. Nevertheless, our fair value estimate remains at a premium to the latest estimate of net tangible assets per security of AUD 6.07 in June 2024, down 23% from a year earlier. We think this is reasonable given the significant high-margin fees and cash flow expected from Lendlease’s asset management business.