LBS Bina (LBS) reported a sequentially stronger net profit of RM20.2m (-4.3% YoY, +632.7% QoQ), though not a surprise as business activity resumed postmovement lockdown. Cumulative 9MFY20 net profit of RM32.2m (-38.9% YoY) is at 62% of our full-year estimates and at 74% of consensus. We deem our numbers in line however, on expectation of similar performances in the quarters ahead. The Group has surpassed its RM1bn sales target for the year. We retain our Trading Buy call on LBS with an unchanged target price of RM0.55 (60% discount to fully-diluted RNAV), with its expected earnings recovery underpinned by its RM2.23bn in unbilled sales and potential developments in its Zhuhai International Circuit garnering investor interest. LBS remains an attractive long-term proposition given its entrenched position as a leading player in the domestic mass-market affordable housing segment.
- 2020 launch updates. Five (5) projects across 5 different locations have been launched this year (Table 1) – CyberSouth commanding the lion’s share with 1,795 various unit types carrying a gross development value of RM737m. At this juncture, 2021 indicative launch plans (Table 3) are all Klang Valley-based, with estimated gross development value of RM1.39bn.
- Current sales. Pace of sales slowed again however, only rising by RM156m in the last three months to RM1.10bn as at 29 November (@ 24 August: RM947m). Sales target of RM1.0bn for the year has been surpassed though that has never been in any doubt given the affordable segment market space the Group operates in which continues to see demand, albeit subdued in current operating and economic conditions. Unbilled sales remains at a relatively robust RM2.23bn as at 15 November, with earnings visibility assured for the next 2 years at least.
- Other updates. The Group announced, in early September, that it has entered into a Memorandum of Understanding with Zhuhai Jiuzhou Holdings Group Co. Ltd., with the latter expressing interest in acquiring LBS’ entire 60% rights and interests in Zhuhai International Circuit (ZIC). No details were disclosed, though any potential development is undoubtedly positive as it could allow LBS to finally unlock the value of this plot of land. Negotiations are on-going. On a separate note, upgrading and transformation plans for ZIC have been re-submitted and have successfully obtained necessary approvals to start work within the next two years. Either which way, these developments will contribute positively to the Group over the medium term.
Source: PublicInvest Research - 1 Dec 2020
Source: PublicInvest Research - 1 Dec 2020
