Value investors are constantly on the lookout for ASX All Ords bargains.
Lifestyle Communities Ltd (ASX: LIC) has been through a challenging past 12 months.
The ASX All Ords real estate stock is down 62% over the past year.
From its 2021 peak, the picture is even worse, with the stock down more than 80% since then.
Today, The Motley Fool's James Mickleboro reported that the stock had fallen more than 40% after it was dealt a major legal blow this week.
Lifestyle Communities was instructed by the Victorian Civil and Administrative Tribunal (VCAT) to scrap certain exit fees charged to its residents. The tribunal ruled it had charged significant deferred management fees (DMF) without adequate disclosure.
ASX value investors may be wondering whether the ASX All Ords stock has been oversold.
Let's dig into the business and its future prospects.
What does Lifestyle Communities do?
Lifestyle Communities sells affordable resort-style residential real estate in Victoria. Its target market is over 50s who are semi-retired or working downsized.
Over the past 22 years, the company has grown to operate 32 locations, which house over 5,500 Victorian residents.
The company's tagline, "downsizing to a bigger life", centres around its land lease business model. It has three major components: home sales, community operations (a weekly fee for access to amenities), and a deferred management fee (the subject of the ruling in question).
Secular tailwinds
Despite the share price going backwards lately, the business remains exposed to several tailwinds that could help it grow into a much larger business.
The major one is Australia's ageing population.
Lifestyle Communities' target market is asset rich and cash poor. This means that heading into retirement, those people have high home equity and low superannuation balances to fund their retirement.
According to the Australian Tax Office, as reported by Australian Super, the median superannuation balance for individuals aged 60–64 is $211,996 for men and $158,806 for women.
To fund a comfortable retirement, the Association of Superannuation Funds of Australia (ASFA) estimates that a single person requires $595,000. For a couple, that figure is $690,000.
Lifestyle Communities homes are priced at between 70-80% of the median house price. This grants residents access to a material amount of equity to boost their retirement funds and enjoy their golden years.
In fact, following the pandemic, there has been heightened enthusiasm to "seize the moment" among older Australians.
This demographic has become important to the travel industry. The International Travel Insights report by Visa estimated an 80% increase in travel by Australians who are 65 years or older over the past 10 years.
Lifestyle Communities residents can use surplus equity from their home sale to spend on experiences while enjoying a high standard of living in their new residential community.
And given the resilience of the residential real estate market, there's never been a better time for boomers to downsize.
Do experts rate Lifestyle Communities a buy?
UBS has retained a buy recommendation for Lifestyle Communities and a price target of $10.37. Given that shares are changing hands for $4.28 at the time of writing, this suggests they will more than double from here.
As reported by the Australian Financial Review, in a broker note, UBS analyst Tom Bodor suggested that a resolution of the tribunal process will enable the company to move on from a very difficult period. He believes it "will also allow the business to potentially reset its contracts, creating an opportunity to rebuild the brand and ride the strong land lease market."
Goldman Sachs also believes the ASX All Ord stock can double from here, with a buy rating and price target of $9.95.
Similarly, Ord Minnett has placed a price target of $9.83 on the stock.
Foolish Takeaway
It's been a tough year for Lifestyle Communities. This latest court ruling is less than ideal. However, the company operates in a growing market and has several tailwinds that could see it become a much bigger business. With its shares trading just above multi-year lows, the ASX All Ords company may be too cheap to ignore today.
