Date: July 02 2012
Lend Lease rarely issues profit guidance to the market and brokers have welcomed today's announcement of an upgrade to the builder's expected earnings range.
The news was enough to make the stock the best performer in the top 50 in early trading. The company's shares were recently up 26 cents, or 3.6 per cent, to $2.46.
The market consensus for the 2012 financial year was about $440 million but today Lend Lease said that is now likely to fall between $485 million and $505 million.
The upgrade to the range reflects the group’s number of high-profile projects it has won over the past year through its infrastructure business, Valemus.
It does not include any forecasts from the Barangaroo South project, which will start to flow through in the next two years.
Winston Sammut, managing director of Maxim Asset Management said it was good news to kick off the new financial year.
‘‘It’s encouraging to have the first day’s trading of the 2012-13 year with an earnings upgrade,’’ he said.
Brokers at JP Morgan said the group’s 2012 financial year’s estimate will include capital gains on the reduction in its
share of the Parkway Parade shopping centre in Singapore and the recent sale of a 50 per cent interest in Greenwich Peninsula, London amongst others.
‘‘Broadly, we view this upgrade positively. The better than expected conditions for the construction businesses are partly offset by the weakness in Australian residential markets, though this weakness is not unexpected,’’ the JP Morgan brokers said.
‘‘We also note that our earnings estimates already include the impact of capital recycling gains in the 2012 financial year.
Therefore, while the lower tax rate does help, we believe that a material proportion of this upgrade is driven by improvements in operational conditions for the group.’’
Lend Lease’s chief executive Steve McCann has consistently said the group was focused on expanding its infrastructure business to balance its development and construction portfolio.
Andrew Macfarlane, an analyst at Goldman Sachs also viewed the new earnings range as a positive.
‘‘The strength of the announcement is chiefly due to the fact that Lend Lease management does not normally provide earnings guidance. Our earnings estimates and price target are under review,’’ he said.
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