Sandstone Insights: ACCC raises concerns over Stockland's proposed acquisition of Lend Lease communities
The ACCC has expressed concerns regarding Stockland Corp Limited's (SGP) acquisition of 12 communities from Lend Lease Corporation (LLC), focusing on potential competition reduction in key areas.
ASX code: SGP
Suggestion: Buy
Need to know
- The ACCC released comments on SGP's proposed acquisition of 12 Lend Lease Corporation (LLC) community assets
- The comments suggest concern around four key geographies
- These geographies represent approximately 26% of lots
- A revision in the deal is likely to be earnings neutral in FY25, but shrinks the total size of the prize.
ACCC update
- Communities acquisition: the ACCC announced its concern about how SGP’s acquisition of 12 LLC communities could reduce competition in four key areas.
- Both LLC and SGP believe they have compelling reasons why it doesn’t lessen competition and will engage with the ACCC to address these views. This raises the potential of LLC retaining several of the communities.
- Impact: it now becomes a 2H25/FY26 earnings story. Communities in the ACCC areas of concern represent approximately 26% of the lots.
- Earnings neutral in FY25 at almost any size. Any divestment would limit medium-term upside which we think could be a 40% uplift in annual housing sales or an A$100-150 million boost to housing EBIT in FY26/27.
Investment view
Stockland continues to benefit from residential supply shortage tailwinds and migration (albeit slowing). We suspect that Stockland should provide meaningful growth to settlements and earnings over the longer term. The market is forecasting a high single-digit FFO growth out to FY27e with a 20% uplift in settlements from FY25. The potential easing of interest rates later in 2024 will likely provide a tailwind to volumes, the multiple SGP trades at.
SGP trades on a 13x P/FFO with an NTM dividend yield of 5%. SGP has displayed a clear pathway to sustained FY25 onward earnings growth. In our view, the market will be comfortable with the above long-term average multiple given the strong growth profile and the difficulties seen in other commercial real estate market segments.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Explore the markets with our free course
Discover and learn how the range of markets you can trade on with IG Academy's online course – ‘Introducing the financial markets’.
Put learning into action
Try out what you’ve learned in this shares strategy article risk-free in your demo account.
Ready to trade shares?
Put the lessons in this article to use in a live account – upgrading is quick and easy.
- Trade on over 10,000 popular global stocks
- Protect your capital with risk management tools
- React to breaking news with out-of-hours trading on 70 key US stocks
Inspired to trade?
Put your new knowledge into practice. Log in to your account now.
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.