Retirement housing sector inhibits growth of share price
LONDON: A major listed housing entity has shed its retirement housing division because it was inhibiting the growth of its share price.
Lendlease shareholders disappointed with years of mediocre total shareholder returns could benefit from the intervention of John Wylie’s Tanarra Capital.
Late on Tuesday night, Tanarra sent Lendlease chief executive Tony Lombardo a seven-point plan it argues could boost the Lendlease share price from about $11 to about $25 a share.
Tanarra is likening its latest “friendly” shareholder activism campaign to the one it launched against Boral in late 2019, which resulted in Boral shareholders earning returns exceeding 70 per cent.
Boral was ultimately taken over in 2021 by Seven Group Holdings and is now chaired by Ryan Stokes.
Tanarra’s plan for significantly boosting Lendlease’s performance recognises that the company is “a fundamentally high-quality global company with real competitive advantages”.
The plan was developed by portfolio manager Vidhur Rangaswamy and analyst Scott Molloy.
Tanarra says it agrees with the strategy Lendlease presented at its 2021 briefing but says shareholder value can be further enhanced by implementing its seven-point plan that includes:
- Exiting Australian retirement and communities, or reducing equity stakes to less than 10 per cent;
- Accelerating funds under management (FUM) growth by building capabilities to source external assets;
- Fully embracing the global gateway cities strategy by building out and exiting exposures to cyclical Australian markets;
- Better aligning executives with shareholders through an increased total shareholder return (TSR) component in the long-term incentive (LTI) plan, and aligning other employees through an employee share scheme (ESS);
- Expanding the cost-out program, in particular from group overheads;
- Further enhancing the board’s expertise in property development and construction;
- Extending leadership in green design and construction, especially in the use of cross-laminated timber and low-carbon concrete, and also in energy efficiency.
The presentation published on Tanarra’s website highlights Lendlease’s poor sharemarket performance for an extended period.
“Lendlease’s total shareholder return over the past five years has been very weak at minus 21 per cent, lagging the S&P/ASX 300 by 85 per cent,” the presentation says.
Lombardo says he welcomes Tanarra’s suggestions because they are in line with the strategy he put forward in August last year.
“I always welcome shareholder feedback – it’s good to understand how they’re thinking, and it’s nice that Tanarra has come on the register,” he says.
“I do think we’ve got a really good strategy in place and there’s been momentum building over the last 12 months.
“I think there’s been strong symmetry between what Tanarra has written and what we’re already doing, and what I’ve already discussed with other investors who just haven’t made those statements publicly.”
Lombardo says Tanarra’s call for greater alignment between the performance of the company and shareholders has already been addressed by the board.
He says he is confident Lendlease has the right strategy, and it is now a matter of executing against the plan. He says the appointment of Nick Collishaw to the Lendlease board added property experience.
Tanarra is believed to own about 2.5 per cent of Lendlease’s issued capital.
