LendLease Group (LLC.AX): Consensus earnings headwinds, elevated gearing lead us to downgrade to Neutral

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17 Aug 2026 18:09:17 ET │ 16 pages

LendLease Group (LLC.AX)

Consensus earnings headwinds, elevated gearing lead us to downgrade

to Neutral

CITI'S TAKE

We downgrade LLC to Neutral following disappointing FY27 guidance of

37–41c, which sits 30% below our initial estimates. This shortfall stems

from elevated leverage driving higher debt costs, alongside weaker

investment income from prior fee reductions. While development income

will rise in FY27 via 1 Circular Quay (Sydney), tough residential conditions

in Melbourne pose downside risks to Vic Harbour. Looking to FY28,

project delays at Comcentre and One Darling Point push completions to

FY29, creating a growth air pocket. Additionally, potential APPF fund

redemptions in November 2026 threaten investment earnings. Although

LLC has progressed asset sales, pro forma gearing remains high at 30.2%,

well above the 5–15% target. With gearing expected to stay elevated

through 1H27 and a new CEO commencing on August 24, we expect

investors to remain cautious. We believe the market will await strategic

clarity before forming a strong view on the stock.

Core business earnings growing lesser than anticipated in FY27 — LLC's FY26

core IDC EPS was 33.7c, in-line with top end of FY26 guidance of 28-34c. FY27

guidance of 37-41c, implies EPS growth of ~16% at mid-point, which is -30% below

Citi estimates at the beginning of the day (56.4c). We understand that part of this

weakness is due to higher leverage which results in higher debt costs, with the

balance weaker investment income given fee reductions. Development income does

rise in FY27 with 1 Circular Quay in Sydney, but is reliant on successfully completing

the sales of Melbourne apartment projects (Regatta and Ancora), and given tough

residential market conditions, we see some potential for downside risk here. The

only shining light could be the construction business (~5% implied EBITDA margins

in 2H) but this is unlikely to move the needle given it contributes ~15-20% of

earnings.

LLC.AU revisions (Y/E Jun)

2025A

2026A

2027E

2028E

2029E

Reported Profit (A$m)

225.0

% revision

0.0%

Core Net Profit (A$m)

386.0

% revision

0.0%

Core EPS (A¢)

55.9

% revision

0.0%

…