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Author: PublicInvest   |   Latest post: Fri, 15 Nov 2019, 9:19 AM

 

LBS Bina Group Berhad - Slower Start

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LBS Bina (LBS) reported a 1QFY19 net profit of RM17.7m (-23.3% YoY, - 26.7% QoQ), coming in broadly within expectations despite meeting only 18% of our and consensus full-year estimates. We anticipate stronger recognitions in subsequent quarter as various projects progress into more advance stages, underpinned by its unbilled order book of RM1.71bn. We remain affirmed of LBS’ investment merits 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 with an unchanged target price of RM1.00 as we keep the 30% discount to fully-diluted RNAV, the lower discount vis-à-vis its peers given the Group’s ability in monetizing its vast land bank despite challenging operating conditions. We see current share price weakness as opportunistic for accumulation. The ZIC in China is a key re-rating catalyst.

  • 2019 launch updates. Four projects carrying gross development values (GDV) of RM622m have been launched to-date (Table 1), the bulk of which being the Klang Valley which continues to see encouraging demand. The remainder of this year will see six projects spanning the Northern, Southern and Central regions launched, with cumulative GDVs of RM1.2bn (Table 2).
  • Current sales. Pace of sales have picked up in the last 3 months. Whilst the first two months of this year only clocked in RM166m worth of sales, year-to-date (up to May 26) sales have jumped to RM617m, this including RM92.7m in options to purchase at its CyberSouth project, pending conversion to sales. The Group is maintaining its 2019 sales target of RM1.5bn, which should be achievable considering its existing unsold stock of RM374.5m (as at March 2019) coupled with its 2019 launch plans.
  • Zhuhai International Circuit (ZIC) remains work-in-progress, with still no noticeable progress made. Discussions are on-going with potential parties at all levels. Recall in November 2017 that redevelopment approvals had come with a condition that works had “to be started” by November 2019 for the larger Western plot. Management sees no issue in getting extensions toward fulfilling this condition. The 264-acre ZIC plot is a key re-rating catalyst, with its conservative value (ascribing similar selling price of about RM50psf transacted in 2013 for its golf course and surrounding land) already worth some RM345m to shareholders of LBS, an attractive 43% of its current market capitalization given recent share price weakness. Recent developments in the Greater Bay Area, particularly with the opening of the Y bridge connecting Hong Kong, Zhuhai and Macau pegs current market value of land in Zhuhai at an estimated ~RM355psf.

Source: PublicInvest Research - 3 Jun 2019

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