LSL Property Services PLC

LSL Property Services PLC (LON: LSL) is UK based residential property services groups catering lenders, buyers and sellers of residential properties, tenants and landlords.

On 4^th August 2020, the group is projected to release its next interim results.

Preliminary full-year results of FY2019 (31^st December 2019, GBP Million)

(Source: Financial Release, Company Website)

During the FY19, the Group Revenues surged 4% on a like-for-like basis, amid challenging residential market conditions. However, the Reported Group Revenues plunged 4% to £311.1m in FY19 (2018: £324.6m). While Group Underlying Operating Profit grew by 3% to £37.0m in FY19 (FY18: £35.9m) and Group Adjusted EBITDA was up by 25% in FY19. However, the profit before tax fell drastically by 31% to £16m in FY19. Also, the net Bank Debt surged 30% to £41.9m in FY19 (FY18: £32.1m). Although, the proposed final dividend has been slightly increased to 7.2 pence per share in FY19 as against 6.9 pence per share in FY18.

 Share Price Performance
 
Daily Chart as of March 27^th, 2020, after the market closed (Source: Thomson Reuters)

LSL Property Group’s shares closed trading session at GBX 160.00 on 27^th March 2020 and was up by 0.94% versus the previous day closing price. Stock's 52 weeks High is GBX 345.00and Low is GBX 145.00. The share price performance of the stock for 1 month, 3 months and 6 months have been negative and stood at -51.36%, -38.46% and -26.94% respectively.

Valuation Methodology
 

*Peers: Crest Nicholson Holdings PLC, Vistry Group PLC, Countryside Property PLC and Redrow PLC
 
Valuation Metrics

(Source: LSE)
 
As on 28^th February 2020, the Price/Book multiples of the LSL property Services Plc was trading at a higher multiple as compared to its peers.
 
Key Risks
 
The UK property market remained quite challenging in 2019. The HM Land Registry Property Transactions had plummeted 7% in FY19. Moreover, the market transaction continued to decline in London and South East England, whereas total mortgaged surged 0.9% and Re-mortgage Approvals grew by 0.7%. The revenue of their Marsh & Parsons also declined by 3% in FY19.
 
Conclusion
 
During FY19, the group revenue and profitability significantly declined. Moreover, the ongoing situation of Covid-19 crisis would further impact the residential market and macroeconomic indicators since there is massive shutdown and business loss globally. It is also affecting the lead sales indicators in Estate Agency. Considering the uncertain potential impact of COVID-19 virus housing market of United Kingdom, the LSL Board has kept proposed final dividend under review and will present its proposal to shareholders at the AGM 2020.
 
However, the total gross mortgage lending in 2019 was in line £268bn (2018: £269bn), as compared to the previous year. The group expect that market condition in 2020 would be favourable as Estate Agency sales pipeline at 29th February 2020 was £3.6m higher than the Board's prior expectations.
 
Based on the headwinds and factors highlighted above, we recommend investors to keep a “Watch” on the stock at the closing price of GBX 160.00 (as on 27^th March 2020), with support from new catalysts to be evaluated at a later stage.  
 
 
 
*All forecasted figures and Peers information has been taken from Thomson Reuters.

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