Lendlease share price jumps 6% after being given conviction buy rating

The Lendlease Group (ASX:LLC) share price is jumping higher today after Goldman Sachs retained its conviction buy rating on its shares…

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Lendlease Group (ASX: LLC) share price has been among the best performers on the S&P/ASX 200 Index (ASX: XJO) on Thursday.

In afternoon trade the international property and infrastructure company's shares are up over 6% to $12.99.

Why is the Lendlease share price jumping higher today?

Investors have been buying Lendlease's shares on Thursday after analysts at Goldman Sachs retained their conviction buy rating on them.

Although the broker acknowledges that its FY 2020 net profit after tax is going to fall well short of consensus expectations, it believes it is worth sticking with the company.

Its analysts expect the company's profits to rebound strongly in FY 2021 and notes that its shares were changing hands at just 10.6x FY 2021 earnings prior to today's gains.

In light of this, it has put a $16.55 price target on Lendlease's shares, which implies further upside of 27% over the next 12 months.

Commenting on the new financial year, Goldman said: "LLC has executed agreements to sell a 25% stake in the first tower of One Sydney Harbour to Mitsubishi Estate, locking in a A$100m post-tax gain for FY21 and reducing its future funding requirements for the A$2bn project. The Group also confirmed that PSP Investments has signed on as LLC's partner for the A$4bn Milano Santa Giulia project."

"More broadly, management noted continued strong demand from capital partners for new opportunities and highlighted Melbourne Quarter (Commercial), the Google Bay Area project, 30 Van Ness (San Francisco), International Quarter London, Silvertown Quays and Milan Innovation District as likely drivers of near-term development origination profits," it added.

The broker is also pleased to see that the exit of its Engineering business is on track to complete in the near future.

Its analysts said: "Management confirmed again today that LLC expects the sale of the Engineering business to complete early this financial year. In our view, LLC's decision to bring all remaining estimated exit costs to account in FY20 increase the likelihood that completion of the sale is imminent."

Should you invest?

I agree with Goldman Sachs on Lendlease and see a lot of value in its shares. Especially, now the bad news is out of the way.

Furthermore, I think it could be top option if you're an income investor. Goldman Sachs estimates that Lendlease's shares currently offer a FY 2021 dividend yield of 4.4%.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Gainers

Young girl drinking milk showing off muscles.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a great end to the trading week for ASX investors today.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Share Gainers

3 ASX 200 stocks smashing the benchmark this week

These three ASX 200 stocks are leading the charge this week. Here’s how.

Read more »

A young woman holding her phone smiles broadly and looks excited, after receiving good news.
Share Gainers

Why A2 Milk, EOS, GQG, and Mineral Resources shares are racing higher today

These shares are ending the week strongly. But why?

Read more »

A man wearing a red jacket and mountain hiking clothes stands at the top of a mountain peak and looks out over countless mountain ranges.
Share Gainers

Here are the top 10 ASX 200 shares today

It was another disappointing day for ASX investors this Thursday.

Read more »

two men smiling with a laptop in front of them, symbolising a rising share price.
Share Gainers

Why Pinnacle, PWR, Race Oncology, and Vulcan shares are flying today

These shares are having a good session on Thursday. But why?

Read more »

A beautiful woman holds up one finger with one hand and has her hand on her waist with the other as she smiles widely as though she is very pleased about something.
Share Gainers

Why Boss Energy, Emeco, Mineral Resources, and Plenti shares are pushing higher today

These shares are having a good time on hump day. But why?

Read more »

Three small children reach up to hold a toy rocket high above their heads in a green field with a blue sky above them.
Share Gainers

3 ASX 300 shares going gangbusters on Wednesday

Investors are bidding up these three ASX 300 shares today. But why?

Read more »

Man raising both his arms in the air with a piggy bank on his lap, symbolising a record high.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a huge Tuesday for ASX shares, with the index resetting its record high.

Read more »