LLC delivered FY16 NPAT earnings increase up 13% to $700m. The share price has underperformed in the early stages of 2016 reflecting fears of significant apartment defaults which could derail an otherwise strong cash flow profile. The announced FY16 earnings result puts some of these fears at ease and on 11x forward earnings and FY17 EPS growth of 6 – 8%, we see okay value on a relative basis.
FY17 revenue forecast of $15b, EBIT of 1.1b and DPS $0.66, placing the stock on a forward yield of almost 5%.
We own LLC and have left the stock uncovered coming into the earnings result. Our view, (as expressed in the monthly strategy recording), on LLC was the market had become too negative and we are now seeing the re-rating of the stock back to our initial target price of $14.50. With the stock now back at fair value, we’ll look to set the covered call position into the December period.
Author: Leon Hinde
Leon has been working in the financial services industry for 18 years in management and advisory roles. Leon has extensive experience in general advice and dealings involving securities and derivative financial products.
PS 146 Securities & Derivatives, ADA 1 & 2 accreditation, Responsible Manager Certificate. Leon is authorised to provide financial product advice and deal with respect to the following financial products:
· Deposit Products
· Interest in managed investment schemes; and
· Government debentures, bonds and stocks