Real-estate service firms CBRE Group and Jones Lang LaSalle have wide moats, good growth prospects, and are trading at about a 30% discount to our fair value estimate.
Ed Mui: CBRE Group and Jones Lang LaSalle are two wide-moat real estate service firms that we believe are trading at about 30% discount to fair value, due to overblown uncertainty from the recent Brexit vote.
Even though the Brexit vote represents short-term volatility and uncertainty weighing down both these names, we think that both these companies will benefit from long-term growth in demand, mainly from urbanization in developing markets, and trends in outsourcing and institutionalization of real estate that will increase demand for real estate services.
In addition, both these companies have done a great job shifting their business mixes toward more recurring revenue streams which should insulate it from any potential downturn in the future. We think their wide moats stem from intangible assets mainly from a trusted brand name, a proven track record, and a wide network of expertise that keeps employees and clients with the firm and increases switching costs.
For investors who have an appetite for risk, we think that Jones Lang LaSalle and CBRE Group, who are trading at about 30% discount to fair value but have good growth prospects, represent attractive investment opportunities.
