Analysts from Ord Minnett say that they believe Lendlease’s sale of its engineering business will cause the company’s shares to rerate.
The analysts believe that on the back of a sale, shares would increase to between $18 and $18.50.
Lendlease (LLC) is trading at 12.5 times its net profit compared to the 19.3 times average across the broader market.
“The company is in a sound capital position and has strong momentum in its development business in our view,” the analysts said in a research note today.
This week, it emerged that Lendlease Engineering, in a joint venture with CIMIC, has secured the Badgerys Creek earthworks contract for Western Sydney International Airport.
The project is forecast to generate about $650m of revenue in what is one of the country’s largest earthworks projects.
Lendlease has placed its engineering and services business up for sale through Morgan Stanley and Gresham and is expected to soon shortlist its sales process to one or two parties.
A $500m pre-tax provision was issued against the division for underperforming projects.
Final-round offers for the engineering business are due in coming weeks and a sale is possible by end of 2019, subject to conditions.
Lendlease shares were trading at about $16.90 late Tuesday morning.
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