Barclays on U.S. REITs: CBG and JLL Undervalued - A Buying Opportunity

Barclays on U.S. REITs: CBG and JLL Undervalued - A Buying Opportunity

Barclays analyst. Ross L. Smotrich, says, "CB Richard Ellis (NYSE: CBG) and Jones Lang Lasalle (NYSE: JLL) are each down nearly 40% since reporting 2Q11 results (versus about -10% for the S&P 500) on concerns of a macroeconomic slowdown. We believe the market is pricing in downside scenarios as severe as 2009, which we think are unlikely to materialize. We analyzed transaction data and spoke with market participants and company management; it appears recent market turmoil has not materially affected either company's core businesses thus far."

"We are lowering our 12-month price target for CBG to $24 per share (from $30) and our target for JLL to $97 per share (from $111), driven by our lower estimates and a lower terminal growth rate in our DCF analysis (3% versus 4% previously). Our updated CBG price target implies 17.6x 2012E AEPS, and a 71.9% total return, and is based on a DCF value of $23.71 (75% weighting) and a sentiment / regression value of $26.85 (25%). Our updated JLL price target implies 17.0x 2012E AEPS, and a 60.7% total return, and is based on a DCF value of $95.56 (75%) and a sentiment/regression value of $101.38 (25%). Currently trading at 10.2x and 10.6x 2012E AEPS, respectively, we think CBG and JLL are compelling investments."

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