1、North America Equity Research18 January 2019Equity Ratings and Price TargetsMkt CapRatingPrice TargetCompanyTicker($mn)Price($)CurPrevCurEnd DatePrevEnd DateCBRE Group,IncCBRE US15,186.2244.55OWn/c54.00Dec-19n/cn/cCushman&WakefieldCWK US3,729.6516.77OWn/c21.00Dec-19n/cn/cJones Lang LaSalle IncJLL US
2、6,480.74142.83OWn/c173.00Dec-19n/cn/cRealogy Holdings Corp.RLGY US2,193.5618.29UWn/c19.00Dec-19n/cn/cRE/MAX Holdings Inc.RMAX US1,169.2038.58UWn/c38.00Dec-19n/cn/cSource:Company data,Bloomberg,J.P.Morgan estimates.n/c=no change.All prices as of 18 Jan 19.Real Estate ServicesModel Updates,No Estimate
3、 ChangesREITsAnthony Paolone,CFA AC(1-212)622-Bloomberg JPMA PAOLONE J.P.Morgan Securities LLCMichael W.Mueller,CFA(1-212)622-J.P.Morgan Securities LLCNikita Bely(1-212)622-J.P.Morgan Securities LLCHong Zhang(1-212)622-J.P.Morgan Securities LLCPatrice Chen(1-212)622-J.P.Morgan Securities LLCSarah Ta
4、n(1-212)622-J.P.Morgan Securities LLCDhiraj K Kapgate(9122)6157-J.P.Morgan India Private LimitedSee page 16 for analyst certification and important disclosures,including non-US analyst disclosures.J.P.Morgan does and seeks to do business with companies covered in its research reports.As a result,inv
5、estors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.We are introducing our out-year estimates.We are making no changes toour current est
6、imates.2North America Equity Research18 January 2019Anthony Paolone,CFA(1-212)622-CBRE Group,IncOverweightCompany DataPrice($)44.55Date Of Price 18-Jan-1952-week Range($)50.43-37.45Market Cap($mn)15,186.22Fiscal Year End DecShares O/S(mn)341Market Cap($mn)15,186.22Price Target($)54.00Price Target En
7、d Date 31-Dec-19CBRE Group,Inc(CBRE;CBRE US)FYE Dec2017A2018E2019E2020E2021EEPS-Recurring($)Q1(Mar)0.450.54A0.550.600.65Q2(Jun)0.670.74A0.740.790.85Q3(Sep)0.650.79A0.820.870.94Q4(Dec)0.961.111.191.251.36FY2.733.183.283.503.78Bloomberg EPS FY($)2.653.073.383.633.87Source:Company data,Bloomberg,J.P.Mo
8、rgan estimates.Investment Thesis,Valuation and RisksCBRE Group,Inc(Overweight;Price Target:$54.00)Investment ThesisWe rate shares of CBRE Overweight.We believe management is driving growth through market share gains,and we see the outsourcing business continuing to deliver outsized growth.The result
9、 should be competitive bottom-line earnings growth for a best-in-class platform despite valuation that is at a discount to the S&P 500.ValuationCBRE trades at 13.6x our 2019 EPS estimate compared with peer JLL at 12.5x,CWK at 10.9x,and the S&P 500 at 15.8x.In terms of EBITDA,we calculate a 2019 EBIT
10、DA multiple of 8.7x for CBRE versus 8.2x for JLL,8.2x for CWK,and the S&P 500 at 10.4x.Our Dec 2019 price target stays at$54/share.We utilize a discounted cash flow model to arrive at this price target.Our model takes two steps.We first forecast cash flow and dividends(none)to common shareholders th
11、rough 2023 based on our bottom-up earnings model.We then assume a long-term cash flow growth rate of 4%and full payout of cash to shareholders thereafter.We discount this dividend stream back to the end of 2019 at a discount rate of 10.0%.The discount rate is toward the high end of the range for our
12、 real estate stock coverage universe(7.75-10%)given CBREs more transaction-oriented income stream and higher beta.Risks to Rating and Price TargetAs an Overweight-rated stock,risks to our rating include items that could cause CBRE to underperform our coverage universe.First,we think service companie
13、s like CBRE could exhibit higher beta than our typical company under coverage.As such,a pullback in the market could disproportionately impact the stock.In addition,if liquidity in the commercial real estate markets deteriorates or if interest rates move notably higher,investment sales transactions
14、could pull back,negatively impacting the companys capital markets businesses.On the leasing side,if job growth weakens or does not translate into incremental space demand,the companys leasing business 3North America Equity Research18 January 2019Anthony Paolone,CFA(1-212)622-could be impacted.The co
15、mpany has global exposure,thus currency and/or regional trends could have an impact on the business.4North America Equity Research18 January 2019Anthony Paolone,CFA(1-212)622-CBRE Group,Inc:Summary of FinancialsIncome Statement-AnnualFY16AFY17AFY18EFY19EIncome Statement-Quarterly1Q18A2Q18A3Q18A4Q18E
16、Total Revenue13,07218,62921,07722,246Total Revenue4,674A5,111A5,261A6,031Gross Profit3,9464,3254,8205,174Gross Profit1,054A1,153A1,162A1,452Operating Expense(9,125)(14,304)(16,257)(17,072)Operating Expense(3,620)A(3,959)A(4,099)A(4,579)Adjusted EBITDA1,5611,7171,8611,889Adjusted EBITDA348A439A463A61
17、0Interest Expense(145)(137)(107)(102)Interest Expense(29)A(27)A(27)A(24)Depreciation and Amortization(253)(293)(334)(354)Depreciation and Amortization(79)A(84)A(85)A(86)Net Income7789301,0921,102Net Income186A253A270A383Earnings per share(EPS)2.192.733.183.28Earnings per share(EPS)0.54A0.74A0.79A1.1
18、1Adjusted EPS2.302.733.183.28Adjusted EPS0.54A0.74A0.79A1.11Weighted average diluted shares338341344336Weighted average diluted shares343A344A344A345Dividends per share0.000.000.000.00Dividends per share0.00A0.00A0.00A0.00Balance Sheet and Cash Flow DataFY16AFY17AFY18EFY19ERatio AnalysisFY16AFY17AFY
19、18EFY19ESales growth20.4%42.5%13.1%5.5%Total Assets10,78011,71813,34113,493Adj.EBITDA growth10.5%10.0%8.4%1.5%Cash and cash equivalents763752860899Adj.EPS growth12.4%18.6%16.4%3.2%Total Debt3,8032,9103,4853,485Total Liabilities7,7227,5448,2058,205Gross Margin30.2%23.2%22.9%23.3%Net Debt3,0402,1592,6
20、252,585EBITDA Margin11.9%9.2%8.8%8.5%Shareholder Equity3,0144,1145,0765,229Tax Rate33.8%28.3%23.5%23.5%Net Margin6.0%5.0%5.2%5.0%.Net debt/EBITDA1.91.31.41.4Net debt/capital(book)1.00.50.50.5.Return on assets(ROA)7.1%8.3%8.7%8.2%Return on equity(ROE)27.2%26.1%23.8%21.4%Source:Company reports and J.P
21、.Morgan estimates.Note:$millions(except per-share data).Fiscal year ends Dec5North America Equity Research18 January 2019Anthony Paolone,CFA(1-212)622-Cushman&WakefieldOverweightCompany DataPrice($)16.77Date Of Price 18-Jan-1952-week Range($)19.45-13.25Market Cap($mn)3,729.65Fiscal Year End DecShare
22、s O/S(mn)222Price Target($)21.00Price Target End Date 31-Dec-19Cushman&Wakefield PLC(CWK;CWK US)FYE Dec2017A2018E2019E2020E2021EEPS-Recurring($)Q1(Mar)(0.23)0.08A0.080.100.14Q2(Jun)0.370.46A0.400.450.50Q3(Sep)0.100.45A0.380.430.48Q4(Dec)1.200.600.690.750.81FY1.251.701.541.721.92Source:Company data,B
23、loomberg,J.P.Morgan estimates.Investment Thesis,Valuation and RisksCushman&Wakefield(Overweight;Price Target:$21.00)Investment Thesis We like the commercial real estate services space and CWKs positioning within it.We see the institutionalization of commercial real estate investing and the growth tr
24、ends in global occupier outsourcing as being beneficial to the largest players in the space,of which CWK is one.We additionally see opportunity for CWK to grow faster than peers in the near term through recruiting,cost optimization,and in-fill acquisitions.As a result,we rate shares as Overweight.Va
25、luationOur Dec 2019 price target stays at$21/share.In valuing the company we used a discounted cash flow analysis,which incorporates a discount rate of 10.75%and a long-term free cash flow/share growth rate of 4.0%.Our discount rate is 25-75 bps higher than what we use for direct peers in order to a
26、ccount for CWKs higher financial leverage.Risks to Rating and Price TargetThe cycle Commercial real estate services is a cyclical business,particularly CWKs capital markets and leasing businesses.We think in a downturn these fee revenue streams can decline.Higher leverage than peers We estimate CWKs
27、 net debt/EBITDA to be about 2.8x,which is higher than its direct peers.While we dont see debt re-financing or liquidity risks at this level,it nonetheless magnifies equity risk on the downside and could limit financial flexibility if a large acquisition opportunity were to arise.Competition for tal
28、ent and clients is significantOverall,the business environment in commercial real estate services is competitive.Top producing brokers remain heavily sought after,which could pose a risk if competitors lure employees away or if the market were such that commission splits move up.In addition,competit
29、ion for client assignments is high,resulting in the need 6North America Equity Research18 January 2019Anthony Paolone,CFA(1-212)622-to not only invest heavily in people but in technology and systems in order to have the latest tools and information to help deliver solutions.Also,as the business move
30、s to account-based services,fees could be pressured due to bundling.Stock overhangFollowing the IPO,the principal shareholders,which include TPG(Texas Pacific Group),PAG Asia Capital,and OTPP(Ontario Teachers Pension Plan),control roughly two-thirds of the shares outstanding.The lockup of the shares
31、 runs for 180 days post the IPO on August 2,or until January 29,2019,after which the shares are tradable.While we view the sponsor quality here as high and have historically seen discipline in terms of exiting positions over time,the expectation that a large share sell-down might occur could weigh o
32、n the stock.Sizable addbacks to get to“adjusted”EBITDA and EPSFollowing the IPO,there remains a variety of one-time,non-comparable,or IPO-related items mainly on the cost side that will be added to arrive at adjusted EBITDA and adjusted EPS.These addbacks should dissipate significantly through 2019
33、but in the meantime could be seen as reducing the quality of those metrics.7North America Equity Research18 January 2019Anthony Paolone,CFA(1-212)622-Cushman&Wakefield:Summary of FinancialsIncome Statement-AnnualFY16A FY17A FY18E FY19EIncome Statement-Quarterly1Q18A2Q18A3Q18A4Q18ETotal Revenue6,2166
34、,9247,9848,403Total Revenue1,768A1,974A2,076A2,166Gross Profit1,1391,2841,6131,940Gross Profit294A410A389A520Operating Expense(5,077)(5,640)(6,372)(6,463)Operating Expense(1,473)A(1,565)A(1,687)A(1,647)Adjusted EBITDA475528656697Adjusted EBITDA75A170A179A232Interest Expense(172)(183)(229)(170)Intere
35、st Expense(44)A(52)A(93)A(40)Depreciation and Amortization(261)(271)(285)(290)Depreciation and Amortization(70)A(72)A(69)A(72)Net Income(450)(221)(122)123Net Income(92)A(32)A(49)A51Earnings per share(EPS)(3.18)(1.53)(0.67)0.55Earnings per share(EPS)(0.63)A(0.20)A(0.25)A0.23Adjusted EPS1.061.251.701.
36、54Adjusted EPS0.08A0.46A0.45A0.60Weighted average diluted shares141144182222Weighted average diluted shares145A164A198A222Dividends per share0.000.000.000.00Dividends per share0.00A0.00A0.00A0.00Balance Sheet and Cash Flow DataFY16A FY17A FY18E FY19ERatio AnalysisFY16AFY17AFY18EFY19ESales growth-11.
37、4%15.3%5.2%Total Assets5,6825,7986,4296,745Adj.EBITDA growth-11.3%24.1%6.3%Cash and cash equivalents3824069031,054Adj.EPS growth-18.0%35.9%(9.2%)Total Debt2,6602,8442,5502,523Total Liabilities5,0925,2944,8874,859Gross Margin18.3%18.5%20.2%23.1%Net Debt2,2782,4381,8401,663EBITDA Margin7.6%7.6%8.2%8.3
38、%Shareholder Equity5905041,5431,886Tax Rate(5.7%)(35.3%)(22.4%)22.0%Net Margin2.4%2.6%3.9%4.1%.Net debt/EBITDA4.797388374.613739592.805851032.3841008Net debt/capital(book)3.94.81.20.9.Return on assets(ROA)5.3%3.1%5.1%5.2%Return on equity(ROE)50.8%32.9%30.3%20.0%Source:Company reports and J.P.Morgan
39、estimates.Note:$millions(except per-share data).Fiscal year ends Dec8North America Equity Research18 January 2019Anthony Paolone,CFA(1-212)622-Jones Lang LaSalle IncOverweightCompany DataPrice($)142.83Date Of Price 18-Jan-1952-week Range($)178.75-119.79Market Cap($mn)6,480.74Fiscal Year End DecShare
40、s O/S(mn)45Price Target($)173.00Price Target End Date 31-Dec-19Jones Lang LaSalle Inc(JLL;JLL US)FYE Dec2017A2018E2019E2020E2021EEPS Reported($)Q1(Mar)0.370.97A0.920.991.12Q2(Jun)2.172.26A2.492.672.90Q3(Sep)2.213.02A2.762.923.17Q4(Dec)4.544.965.225.596.04FY9.3111.2211.3812.1313.17Bloomberg EPS FY($)
41、8.3511.1611.2512.1312.29Source:Company data,Bloomberg,J.P.Morgan estimates.Estimates are Adjusted EPS excluding one-time itemsInvestment Thesis,Valuation and RisksJones Lang LaSalle Inc(Overweight;Price Target:$173.00)Investment Thesis We believe JLL should continue to see its earnings benefit from
42、global commercial real estate fundamentals being in decent shape,the continued institutionalization of CRE that should drive benefits to the largest service providers,and the trend of outsourcing the corporate real estate function to large CRE services organizations like JLL.We thus rate the shares
43、Overweight.ValuationJLL trades at 12.5x our 2019 EPS estimate compared with peer CBRE at 13.6x,CWK at 10.9x,and the S&P 500 at 15.8x.In terms of EBITDA,we calculate a 2019 EBITDA multiple of 8.2x for JLL versus 8.7x for CBRE,8.2x for CWK,and the S&P 500 at 10.4x.Our December 2019 price target stays
44、at$173/share.Our price target is derived from a dividend discount model using our bottom-up earnings model for specific inputs for the next several years followed by big-picture growth and payout assumptions for the long term(perpetuity).We assume that after 2023 100%of capital is returned to shareh
45、olders in the form of a dividend(100%long-term payout).For growth,we assume long-term growth of 4%,which is derived by assuming that the addressable CRE market increases 1-2%annually and inflation in price increases 2-3%annually.We assume no margin expansion or market share gains beyond the next fiv
46、e years.We use a discount rate of 10.50%in our model;by way of comparison,we currently assume a range of discount rates of 9.00-15.00%for the five service companies in our coverage universe(CBRE,CWK,JLL,RLGY,RMAX).Risks to Rating and Price TargetAs an Overweight-rated stock,the risk is that JLL does
47、 not outperform our coverageuniverse.As we see it,some factors that could cause this include 1)higher thanexpected costs that could impugn margins,potentially from technology spend orcompetition for producers,2)regional economic weakness that could dampen CREfundamentals,3)a slowdown in investment s
48、ales resulting from rising rates or a9North America Equity Research18 January 2019Anthony Paolone,CFA(1-212)622-shock to capital markets,4)outflows from the companys investment managementbusiness,and 5)fee compression from competing for assignments.10North America Equity Research18 January 2019Antho
49、ny Paolone,CFA(1-212)622-Jones Lang LaSalle Inc:Summary of FinancialsIncome Statement-AnnualFY16AFY17AFY18EFY19EIncome Statement-Quarterly1Q18A2Q18A3Q18A4Q18ETotal Revenue12,99114,45316,09917,182Total Revenue3,555A3,904A3,970A4,670Gross Profit-Gross Profit-Operating Expense-Operating Expense-Adjuste
50、d EBITDA679771891902Adjusted EBITDA108A194A234A355Interest Expense(45)(56)(53)(50)Interest Expense(14)A(14)A(12)A(13)Depreciation and Amortization(142)(167)(179)(186)Depreciation and Amortization(42)A(46)A(43)A(48)Net Income346280517518Net Income43A110A137A228Earnings per share(EPS)8.389.3111.2211.3
