Once seen as a flagship of Australia’s construction and development sector, the company now finds itself pushed out of the country’s top sharemarket index after a steep share price fall following its latest earnings update. The business, which grew from local builder to global developer over several decades, has struggled for more than 20 years to convert its international ambitions into consistent returns and is still working through the aftermath of ambitious projects, weaker earnings and changing investor expectations.
The recent downgrade from the primary large-cap index into the broader ASX 200 and small-cap benchmark follows a share price drop of nearly 30% in just a few weeks. The market now values the group at about $2.2 billion, roughly one-fifth of what it was worth in 2001 and only just above the rough $2 billion line many use to classify small-caps. Analysts have cut their earnings forecasts by around 30% out to the late 2020s, while the share price trades around a near four-decade low and now sits below a number of specialist listed property trusts in terms of size.
At the heart of the problem is the slow unwind of legacy and non-core assets that were meant to be sold as part of a turnaround strategy pushed by activist investors almost two years ago. The company still needs to offload about $3.8 billion in assets, including a roughly quarter stake in an Australian retirement living platform, a fully owned seniors project in China, more than $900 million of land and inventory and over $700 million tied up in joint ventures across the US, UK, Italy and Asia. Advisory firms estimate that roughly $144 million of costs were tied to these assets in just six months, which risks eroding eventual returns the longer the sales take and has led some investors to argue the group should accept lower prices rather than hold out for “top dollar”.
The uncertainty is compounded by a leadership vacuum at the top. The chief executive is set to depart later this year for a rival group, while the chief operating officer, chief financial officer and head of development have all exited or are about to. Market observers broadly expect the next CEO to be hired from outside the organisation and institutional shareholders appear keen for faster clarity on who will lead the next phase of the turnaround. That lack of visibility makes it harder for investors to judge how aggressively the new leadership will tackle asset sales, balance sheet repair and the refocusing of the development pipeline.
Despite the gloom, some signals suggest the picture is not entirely negative. The company says its Australian construction and development pipeline is rebuilding, with about $4.7 billion of new projects added in six months and a target to add around $10 billion across the group. Its net tangible assets stand above $7 per share, significantly higher than the current trading price, which makes the stock look like a deep discount play to some investors and long-term fund managers. If asset sales accelerate, leadership gaps are resolved quickly and project restocking continues, the business looks like it could shift from being a value trap to a recovery story, but for now that outcome still depends on execution that has so far lagged expectations.
