LandMark White delivers strong revenue and profit growth

Published 14-AUG-2018 12:36 P.M.


2 minute read

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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.

General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (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 and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

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S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

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The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

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