PublicInvest Research

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


LBS Bina Group Bhd - Still On Track

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LBS Bina (LBS) reported a softer 2QFY19 net profit of RM14.0m (-32.6% YoY, -20.7% QoQ), with cumulative 1HFY19 net profit of RM31.7m (-27.7% YoY) coming in below expectations at 33.1% of our and 37.7% of consensus full year estimates respectively. The discrepancy is the result of higher-than expected tax charges this year, leading us to cut our FY19 estimates by 20.1% to account for the difference. FY20/FY21 earnings are adjusted -2.0%/+5.8% for slight changes in timing and margin assumptions. We expect stronger recognitions in subsequent quarters as various projects progress into more advanced stages, underpinned by its unbilled order book of RM1.92bn. 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, but with a lowered target price of RM0.86 (RM1.00 previously) as we raise the discount on fully-diluted RNAV to 40% in light of on-going sector headwinds. The lower discount vis-à-vis its peers reflects the Group’s ability in quickly monetizing its vast land bank despite challenging operating conditions.

  • 2019 launch updates. Seven projects carrying gross development values (GDV) of RM1.07bn have now been launched to-date (Table 1), the bulk of which still being in the Klang Valley which continues to see encouraging demand. The remainder of this year will see five projects launched, with cumulative GDVs of RM878mn (Table 2).
  • Current sales. Unbilled sales have ballooned to RM1.92bn as at July 2019. LBS CyberSouth has been a key contributor in recent times, with 8M2019 no different as RM524m (52% of Group total) in sales have been clocked-in. With overall GDV now revised higher from RM4.03bn to RM8.50bn and its attractive location and product offering, the project is anticipated to be a significant contributor in years forward. Alam Perdana, has also contributed strongly, with both these developments seeing average take-up rates ranging between 43% and 91% within 3 months of launch. The Group is maintaining its 2019 sales target of RM1.5bn.
  • Zhuhai International Circuit (ZIC). The Chinese Government has recently unveiled its national development plan for the Greater Bay Area. To this end, LBS is currently working on improving and upgrading the ZIC upgrading and transformation plan, with a targeted re-submission to authorities by this year-end. This will likely require an extension of time toward fulfilling a stipulated condition with its development approval that works had “to be started” by November 2019 for the larger Western plot. The 264-acre ZIC plot is a key re-rating catalyst, with a conservative value (~RM50psf) already accounting for ~43% of its current market capitalization, let alone estimated current market value of ~RM355psf.

Source: PublicInvest Research - 3 Sept 2019

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