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Author: PublicInvest   |   Latest post: Wed, 20 Nov 2019, 9:59 AM

 

LBS Bina Group Berhad - Tough Year

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LBS Bina’s (LBS) FY18 net profit of RM85.1m (-15.5% YoY) is below expectations at 78% of our full-year estimates and 81% of consensus. The major letdown was slower-than-expected recognition in some of its projects, while certain others were still at early stages of construction, reflected by FY18 revenue slipping 16.7% YoY. While earnings prospects will continue to be underpinned by its healthy unbilled sales of RM1.75bn, we are cutting FY19 and FY20 estimates by an average 24% as we take a more conservative stance on billing recognitions and margin assumptions in light of the challenging operating environment. We remain affirmed of LBS’ investment merits however and continue to like it for its entrenched position as a leading player in the domestic mass-market affordable housing segment. Our Outperform call is retained but with a lowered target price of RM1.00 as we impute a higher 30% (20% discount previously) to fully-diluted RNAV.

  • 2018 Review. A total of 8 projects carrying a total gross development value (GDV) of RM1.20bn were launched during the year (Table 1), with sales of RM1.53bn achieved. This was a scale-down from initial plans of RM2.0bn and RM1.8bn respectively however, reflective of evolving market dynamics (post-General Elections) and challenging operating conditions. 90% (RM1.37bn) of sales done were concentrated in the Klang Valley (Table 2), a significant step up from the 69% (RM982m) done in 2017. 63% of the properties sold were priced below RM500,000 per unit (Table 3). Unbilled sales as at 31 December 2018 are a healthy RM1.75bn.
  • Current sales. The first two months of this year is noticeably slower than in 2018 whereby only RM166m worth of sales have been clocked in versus RM285m in the previous corresponding period. While looking as if it’s falling off the pace toward achieving its 2019 sales target of RM1.5bn, we don’t see any cause for concern as yet considering its existing unsold stock of RM1.1bn coupled with its 2019 launch plans. In fact, the one launch it has had to-date is most encouraging in light of the challenging operating conditions, whereby 52 units in Alam Perdana carrying a GDV of RM20m have been 90%-sold.
  • 2019 Plans (1H). The Group has laid out 4 more launches in the first 6 months of the year, in addition to the one mentioned above. LBS Cybersouth will see 2 separate launches – 674 units with a GDV of RM391m in the Kita Harmoni project, and 972 units with a GDV of RM308m in the Kita Impian project. Alam Perdana will see another launch in March, with Phase 3B carrying a GDV of RM261m from 494 units. Rounding it off will be the Taman Kinding Flora project in Chemor, with 142 units worth RM31m slated for launch in 2QFY19.

Source: PublicInvest Research - 1 Mar 2019

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