Morningstar cuts Lendlease from 'best ideas' list
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The news: Morningstar analysts have removed Lendlease from its monthly Australia and New Zealand 'Best Stock Ideas' list, after the real estate group unveiled its strategy to offload billions of dollars worth of assets from its international operations last week.
The numbers: The analysts said that Lendlease's new strategy — which involves selling most of its international business — will likely see the loss of value in its long-term development and construction projects, contributing to a 23% reduction in Morningstar's valuation to $10 per security.
Lendlease last closed at $5.90.
The context: Despite removing Lendlease from its 'Best Stock Ideas' list, Morningstar analysts noted that the company's new strategy offers greater certainty, reduced risks, and potentially quicker recognition of value.
The analysts also believe Lendlease remains "significantly undervalued", with numerous catalysts to unlock value, including asset sales, a simplified business, and a proposed security buyback once certain milestones are met.
However, they believe Dexus, which was added to the list this month, is more compelling, trading at a similar discount but with a narrow moat and medium fair value uncertainty, versus no moat and high uncertainty for Lendlease.
Morningstar's 'Best Stock Ideas' highlights high-quality Australian and New Zealand companies, which are currently trading at discounts to their assessed fair values.
The analysts also added Brambles, and Endeavour Group and removed a2 Milk Company and Ventia Services Group.
The source: Morningstar research
