Ellinikon Project And Marinas Expansion Will Shape Future Opportunities

Key Takeaways

• Record tenant sales in LAMDA's malls and Ellinikon project developments promise future rental income and cash flow improvements.
  
• Ellinikon project accelerates cash flows and profitability, while marina expansions and deferred revenues indicate future earnings growth.
  
• The dependence on market conditions and project execution, coupled with potential financing challenges and economic shifts, presents risks to revenue, profitability, and margin growth.

Catalysts

Lamda Development S.A., together with its subsidiaries, engages in investment, development, and project management in commercial real estate market in Greece and internationally.

• The ongoing shift from high-street retail to organized venues is boosting revenues for LAMDA Development's malls, with tenant sales hitting record highs. This trend extends to new shopping destinations in the Ellinikon project, potentially increasing future rental income and revenue.
  
• The Ellinikon project's accelerated construction and residential sales are expected to generate significant future cash flows and earnings. This is underscored by the JV agreements and land plot sales, which are contributing to the improvement of the project's profitability and balance sheet.
  
• The anticipated completion of the Ellinikon malls and the potential for industry-wide valuation increases from interest rate cuts provide a forward-looking catalyst for net asset value growth, which could positively impact earnings through increased asset valuations.
  
• The expansion and improved operations of the Marinas, such as the planned developments at Agios Kosmas and Corfu Mega Yacht Marina, are setting a path for future revenue and EBITDA growth, leveraging the robust tourism sector in Greece.
  
• The anticipated significant revenue recognition from existing deferred revenues and additional property sales in 2025, with €326 million in future P&L revenue not yet recognized, suggests a forthcoming boost to earnings, improving future financial performance.

LAMDA Development Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming LAMDA Development's revenue will grow by 6.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.1% today to 16.3% in 3 years time.
• Analysts expect earnings to reach €123.5 million (and earnings per share of €2.42) by about March 2028, up from €19.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 24.1x on those 2028 earnings, down from 61.6x today. This future PE is lower than the current PE for the GB Real Estate industry at 27.0x.
• Analysts expect the number of shares outstanding to grow by 1.09% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 17.63%, as per the Simply Wall St company report.

LAMDA Development Future Earnings Per Share Growth

Risks

• The ongoing project developments, including the significant construction milestones for the Ellinikon Project, depend on resolving labor market constraints, which could delay timelines and impact future revenue and cash flow projections.
  
• The reliance on continued strong demand for residential real estate and higher rental levels could expose the company to risks from a downturn in the property market, potentially affecting revenue generation and margin growth.
  
• The dependence on future land plot sales and successful project execution for significant future cash flows implies potential risks if market conditions change or projects face delays, impacting projected profitability and net asset value.
  
• Sustained growth predictions, particularly around organized retail and marina operations, hinge on favorable tourism trends and consumer shifts, which may not continue if economic or external factors change, affecting revenue streams and earnings stability.
  
• Any unattractive terms regarding future financing for projects, such as for the Ellinikon Malls, or shifts in interest rates could increase financial expenses and reduce net margins.

Valuation

• The analysts have a consensus price target of €10.24 for LAMDA Development based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €12.0, and the most bearish reporting a price target of just €9.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €758.9 million, earnings will come to €123.5 million, and it would be trading on a PE ratio of 24.1x, assuming you use a discount rate of 17.6%.
• Given the current share price of €6.76, the analyst price target of €10.24 is 34.0% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.