Boral Limited (ASX: BLD) has a plan to make $300 million from just one property.
Boral is an international construction materials and building products business employing more than 25,000 employees and contractors. Boral’s operations span 850 operating and distribution sites globally.
Boral’s Big Deal
Boral has announced it has entered into a property development management deed with Mirvac Group (ASX: MGR) in relation to its Scoresby site, which is also known as Wantirna South, in Victoria.
The Scoresby site is a 171-hectare site, under the agreement Mirvac will manage the urban development over a multi-decade time period including a proposed new housing community and new parklands.
How Much Does Boral Expect To Make?
Boral said it expects to receive $3 million of EBITDA in FY19 (click here to learn what EBITDA means) and approximately $66 million through to FY26.
The construction company also said “significant earnings are projected from the development of Scoresby from FY27 to anticipated project completion in 2035. Management have projected that Scoresby could deliver over $300 million of earnings over the life of the project.
The site was formerly a manufacturing plant for Boral Bricks in Victoria which it kept after the sale of its 40% stake of the Boral CSR Bricks joint venture to CSR Limited (ASX: CSR). Part of the site is still leased to CSR. Significant development activities will occur at the end of CSR’s lease.
Boral has a sizeable lank bank, which it can use for other purposes, sale or re-development. In FY19 Boral expects $30 million of EBITDA from property earnings.
Boral CEO and Managing Director Mike Kane said: “The Scoresby development will be a significant value-contributor for both Boral and Mirvac, as well as the local community in Melbourne’s south eastern suburbs.
“Today’s announcement further demonstrates the embedded value of Boral’s land assets with potential development opportunities for those assets at or near the end of their operational life.”
This is good news for Boral to have a sizeable amount of earnings locked in for the future. However, I’m uncertain if now is a good time to buy considering construction is expected to slowdown in the shorter term. The reliable ASX shares in the free report below could be better ideas.
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