Lendlease: Fair Value Lowered by 6% to AUD 8 on Coverage Transfer; Securities Remain Undervalued

We transfer coverage of Lendlease and lower our fair value estimate by 6% to AUD 8 per security. We now assume moderating margins in the outer years rather than the previous assumption of continuously improving margins. The 2024 revamp strategy should lift profitability in the near to medium term as the group farewells international developments and constructions, optimizes headcount, and shifts focus to the higher-margin investments segment. In the longer run, however, margin compression is likely to resume due to the competitive nature of the industries Lendlease operates in.