Lend Lease leads off on a positive note

LEND LEASE securities were keenly sought after the group started the new financial year with an earnings upgrade, which was also one of the few times it has publicly provided specific numbers.
Nanjing Night Net

At the end of a busy day’s trade, the shares closed up 31¢, or 4 per cent, at $7.51.

Brokers welcomed the initiative of providing an update of the expected earnings range. The market consensus for the 2011-12 financial year was about $440 million, but Lend Lease said that was now closer to $485 million-$505 million.

The upgrade reflects the number of high-profile projects the group has won in the past year through its infrastructure business, Valemus.

It does not include forecasts from the $6 billion Barangaroo South project, which will start to flow through in the next two years. Lend Lease confirmed recently that Westpac and KPMG would be the anchor tenants to the office towers and PwC was tipped to move to the planned third tower.

Maxim Asset Management managing director Winston Sammut 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 JPMorgan said the group’s 2011-12 estimate would 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, among others.

”Broadly, we view this upgrade positively,” the JPMorgan brokers said. ”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.

”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 chief executive Steve McCann has consistently said the group is focused on expanding its infrastructure business to balance its development and construction portfolio.

Goldman Sachs analyst Andrew Macfarlane 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,” he said. ”Our earnings estimates and price target are under review.”

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