LBS’s earnings visibility seen healthy for next two years

LBS Bina Group Bhd (Aug 30, RM1.93)

Maintain outperform call with an unchanged target price (TP) of RM2.23: LBS Bina’s (LBS) first half financial year 2017 (1HFY17) net profit of RM53.2 million (+43.7% year-on-year [y-o-y]) is within expectations at about 49% of our and consensus full-year estimates. 1HFY17 revenue of RM603.4 million (+41.6% y-o-y) saw similarly robust growth, underpinned by an unbilled sales amount of just under RM1.4 billion. Earnings visibility for the next two years are healthy, with upcoming launch plans and likely to extend further. We continue to like LBS for its exposure to the mid-market segment of affordably-priced properties which stands it in better stead in current market conditions.

The group continues to register encouraging numbers despite a slow market, with year-to-date sales (as at August) of RM796 million close to last year’s RM827 million in the corresponding period.

Puchong remains a key driver with the Bandar Saujana Putra, D’Island and Desiran Bayu projects making up 45% (RM357 million) of total sales. Hilltop living is seemingly gaining traction with Midhills (Genting) and Cameron Golden Hills (Cameron Highlands) collectively recording RM260 million (32.7%). Target for the year remains unchanged at RM1.5 billion, 25% higher than last year’s RM1.2 billion.

The remainder of the year will see the group launch some RM1.4 billion worth of properties, the bulk of which will come from its Alam Perdana development (RM628 million), whereby RM220 million in new sales are targeted. Also slated for launch is RM388 million worth of properties in BSP 6 in Bandar Saujana Putra, RM190 million in Skylake Residences and RM170 million in Bukit Jalil, in addition to the RM1.05 billion already launched to date.

On the upgrading and transformation of the Zhuhai International Circuit (ZIC) in China, the area’s council has managed to put through its plans for public viewing, in compliance with regulatory requirements, without any negative comments received.

ZIC is now working on a resubmission of a more detailed conceptual plan which will encompass three components — motor sports, cultural and tourism. Options remain open for now, whether it will be outright development sales or a joint venture as a landowner, or even a separate listing of the entity. Whatever the case, monetisation prospects are promising and are another rerating catalyst.

Recall also that the group acquired in July a 7.98-acre (3.23ha) plot of leasehold land in the Seri Kembangan area with preliminary plans to develop four towers of serviced apartments with an estimated gross development value of about RM600 million.

With an estimated 10% net margin, the project should enhance earnings by a further 3%-5% per annum over the eight-year period of the development. — PublicInvest Research, Aug 30

This article first appeared in The Edge Financial Daily, on Sept 5, 2017.

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