Just having a stock up 10% in the last three months would seriously beat the S&P ASX All Ordinaries Index's (ASX: ^AORD) 0.3% drop over the same period. However, a 20% increase since early March by Lend Lease Group (ASX: LLC) is a great gain for the property developer.
What's happening: Real estate related companies are seeing an upturn in earnings, but depending on what kind of developments they deal in, the stock advances have been different. Here are three reasons Lend Lease has achieved an impressive increase and what could be seen in its future.
1) Housing market boom
Anyone who has been reading the news will know that the Sydney and Melbourne property markets are growing, with average house prices steadily rising. This makes building homes more attractive since new housing developments or unit buildings can be cheaper than established communities.
Low interest rates create more property investors as well. Perth and Brisbane are showing renewed strength as more investors are reaching out from the larger cities, seeking cheaper prices and better yields. Lend Lease develops both units and detached housing communities.
2) Barangaroo South and new development contracts
One of its biggest developments right now is the Barangaroo South project at Sydney's Darling Harbour. It will be a three-tower site that will have shopping, residences and a six-star hotel that includes a VIP gambling venue with Crown Resorts Ltd (ASX: CWN). It is projected to become the new financial centre for Sydney as a number of financial services companies are planning to relocate to the site. The work revenue will keep flowing in for years.
It won a new contract for road upgrading on the Pacific Highway and was chosen as the preferred contractor for the NorthConnex motorway development project in Sydney.
3) Federal infrastructure spending plan
One of the goals of the newly proposed Federal budget is to drive infrastructure projects to stimulate the economy in the wake of the mining pullback. Including about $10 billion already in the pipeline, it proposes to have $50 billion in road, rail, shipping and other social infrastructure projects set over the next six years.
Lend Lease, like other big construction companies such as Leighton Holdings Limited (ASX: LEI), does large scale infrastructure work. The company could benefit directly from winning some of the contracts related to the infrastructure spending plan.
