LandMark White delivers strong revenue and profit growth

By Trevor Hoey. Published at Aug 14, 2018, in Features

Name: LandMark White (ASX:LMW)

Market Capitalisation: $44 million

Opening Share Price: 57.5 cents

LandMark White (ASX:LMW) has delivered a 72% increase in revenues and a 143% increase in pre-tax profit on the back of the successful acquisition of MVS Valuers and delivery of synergy savings exceeding initial expectations.

Revenues from owned businesses were $43.2 million, largely due to the acquisition of MVS.

The company branded revenues, including franchised offices and joint venture businesses, increased 49% to $60.2 million.

The pre-tax profit of $5.8 million was driven by strong revenue growth.

From an operational perspective it is important to note that synergy savings from the acquisition of MVS exceeded expectations, as this should have a further positive impact on fiscal 2019.

Diversification provides robust business model

Statutory Services business contributed $13.4 million of revenue and represented circa 65% of the overall growth in revenue, demonstrating the positive impact of diversification away from the company’s traditional reliance on mortgage valuations.

As an ongoing feature of the business model this has been an important development as it will provide less reliance on a narrow revenue stream that can be affected by cyclical trends.

The pre-tax profit increased 143% to $5.8 million with a key takeaway being the improved margins achieved as a result of the MVS acquisition.

MVS has also been instrumental in the company increasing market share, and this trend should continue.

Note that any decision with regards to adding this stock to your portfolio should be taken with caution and professional financial advice sought.

Compelling yield proposition

Management declared a fully franked final dividend of 2.0 cents, resulting in the full year dividend increasing to 4.6 cents, up from 4.5 cents in fiscal 2017.

This on its own represents a strong yield of 8%, but taking into account franking credits, the grossed up dividend is circa 6.6 cents, representing a yield of approximately 11.5% relative to this morning’s opening price.

Fundamentally, the company appears to be underpriced with its diluted earnings per share of 5.44 cents representing a price-earnings (PE) multiple of 10.5 compared with the sector average of 15.5.

With the integration of MVS complete and increased clarity around the company’s earnings outlook for fiscal 2019, LMW could be valued more in line with its peers, particularly given its strong fundamentals.

Looking to 2019, management said it is well-placed for further improvements in profitability, capitalising on the acquisition of MVS, realising synergies, growing its market share and expanding in the non-mortgage property services sector.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

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