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Is Lend Lease a buy?

Global property and infrastructure company Lend Lease (ASX: LLC) provided a positive outlook its Annual General Meeting (AGM) last week that led to a small pop in its share price to $11.26. In line with the general market today, the shares are trading back down around the $11 mark, which is where they were pre-AGM.

For the financial year to June 2013, Lend Lease reported net profit after tax of $551.6 million, up 10% on the prior year. Australia remains the key market for Lend Lease with the country accounting for 75% of total group income. Profit growth from Australia was 17.8% for the year; other highlights from the Australian division included a 73% increase in profits from development, securing $7.7 billion in new work, a revenue backlog of $9.6 billion and funds under management up 17% to $10.3 billion.

On the back of a pleasing 2013 financial year the AGM presentation painted a positive outlook for the year ahead. Lend Lease’s global development pipeline currently sits at $34.7 billion; this includes the $6 billion Barangaroo South project that will be developed in conjunction with Crown Resorts (ASX: CWN), which recently received the backing of the New South Wales government to develop a rival casino to Echo Entertainment’s (ASX: EGP) The Star in Sydney.

Financial guidance has so far been avoided by Lend Lease for the current year to June 2014, however Managing Director Steve McCann did state at the AGM that, “Lend Lease is well positioned with a significant development and construction backlog, a strong balance sheet and access to third party capital to assist funding the delivery of the pipeline.”

Foolish takeaway

Based on comments by management, it would seem reasonable to assume that Lend Lease should come close to last year’s operating earnings per share (EPS) of 96.3; however analysts appear to be erring on the side of caution with consensus forecasts suggesting a slight decline.

At the current share price of $11, and assuming a 5% drop in operating EPS, this equates to a price-to-earnings multiple of 12 times. That doesn’t appear to be a particularly demanding multiple for Lend Lease given its outlook and exposure to a rising domestic property market. This view would also appear to be supported by a number of brokers, with no less than three brokers currently having ‘buy’ recommendations on Lend Lease.

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Motley Fool contributor Tim McArthur owns shares in Echo Entertainment Group.

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