A property correction may paint a gloomy outlook in some quarters, however the same can’t be said for ASX-listed property valuation and consultancy firm LandMark White (ASX: LMW).
While LMW benefits from a booming property market due to rising sales and developments, LMW can also perform well in a property downturn due to a recent increase in scale, government and insurance division.
For instance, a fall in investment property values can lead to more valuation work in LMW’s government services division.
Rising or falling housing market good for business
Retreating investment property values can often trigger requirements for increase in volumes of valuations required by key government departments. LMW’s government services division undertakes high volumes of means testing work, which is a profitable part of the business.
Insurance valuations and refinancing provide stable revenue streams during a property downturn. It is important to note that the insurance division is a recent addition to LMW and is positioned for strong growth in market share.
Yet, while the Melbourne and Sydney property markets are correcting, improving property values in Western Australia and Queensland – on the back a stronger mining sector – also lift LMW valuation volumes.
It’s important to note that LMW is not a traditional property industry investment company, but rather a transaction-based valuation business. Transactions include the valuations that are performed when people buy, sell, revalue and for prudential management and risk management purposes.
LandMark White was founded in 1982 and listed on the ASX in 2003. Apart from providing commercial and residential valuations, LMW also provides research and property advice that focuses on minimising risk to its clients.
The company has a long and proud heritage of providing independent property services and employs more than 300 skilled professionals.
LMW continues to respond to an industry demanding increases in scale, which the company achieved in fiscal year 2017 via the acquisition of MVS National. LMW is continuing to look for additional acquisition opportunities to increase scale, not only inside the valuations sector, but also in adjacent segments of the market where the skills set and services are complementary, such as quantity surveying.
The company continues to increase market share in the residential valuation space and plans to grow via the government valuation sector, as it services additional requests.
Investors in LMW have previously received an interim dividend of 2.6c per share in March this year and 2.25c in September of 2017.
Earnings and dividends on the way
LMW will report its full year result on 14 August, 2018 and boasts a strong track record of paying dividends as a high yielding stock.
The annual dividend yield on 7 August, 2018 was 8.36 per cent with the current market capitalisation being $44.1 million. With shares trading at 58 cents the company is trading on a modest price/earnings ratio of 12.64.
The company is a cash generating business and its current policy is to target a base of 80 per cent earnings to be distributed to shareholders.
The ex-dividend date for the final dividend is 31 August, 2018. The record date for the final dividend is 3 September and payment will be made on 19 September.
Based upon unaudited management accounts, LMW has generated revenues of A$32.4m and EBITDA of A$4.6m for the nine months to 31 March, 2018. LMW now expects to generate revenues of about A$43.8m and EBITDA of about A$6.6m for the financial year ending 30 June, 2018.
The outlook for the company’s government services division is expected to provide a boost to its financials, with higher revenues expected in the second half of calendar year 2018 and through FY19.
As LMW CEO Chris Coonan stated earlier this year, “we have various opportunities in progress that are expected to deliver additional revenues, which are likely to fall into FY19. LMW is in a strong position to capitalise on its highly profitable existing business and deliver on its organic growth and diversification strategy.”