JF Apex Research Highlights

Author: kltrader   |   Latest post: Tue, 12 Nov 2019, 4:52 PM


LBS Bina Group Berhad - Ended the Year on a Soft Note

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  • Earnings below expectations. LBS Bina Group (LBS) recorded 4Q18 net earnings of RM17.1m, down 47.1% yoy and 29.0% qoq. Overall, 2018 net profit of RM85.0m (- 15.7% yoy) accounts for 83% of our full year earnings estimate and 85% of consensus. The result is below expectations mainly due to significantly weaker-than expected topline in this quarter pursuant to lower progress billings.


  • Disappointing 4Q18. The lower yoy and qoq results were mainly attributable to lower recognition of work-in-progress (WIP) for its on-going projects. The Group had completed and handed over some projects earlier and on-going projects are still at early stages of construction. For the full year of 2018, projects which contributed to revenue and PBT of the Group are Bandar Saujana Putra, Desiran Bayu, LBS Alam Perdana, D’ Island Residence, Zenopy Residences, Cameron Golden Hills, Midhills, Bandar Putera Indah, Residensi Bintang Bukit Jalil, Cameron Centrum, Sinaran Mahkota and Kita @ Cybersouth.
  • Record new sales. LBS successfully chalked up RM1.5b all time high new sales in 2018, exceeding its RM1.4b sales achieved in 2017. Majority of sales are contributed by Klang Valley projects (90%). In terms of property value sold, 63% were priced below RM500k, which are considered as affordable housing.
  • Resilient unbilled sales. Meanwhile, LBS chalked up RM1.7b of unbilled sales as of Dec 18, which is equivalent to 1.5x of its 2018 topline. Hence, this underpins the Group’s revenue visibility of one-and-a-half year.
  • More launches amid prevailing soft property market. LBS targets to launch RM1.8b worth of projects during this year and aims for RM1.5b new sales this year. GDV of planned launches for 2019 is 50% higher than RM1.2b of launched projects in 2018. New launches for this year are: 1) CyberSouth, Klang Valley with GDV of RM871m; 2) Bukit Jalil project with GDV of RM453m; 3) Alam Perdana, Klang Valley with GDV of RM286m; 4) Bandar Putera Indah, Johot with GDV of RM85m; and 5) Taman Kinding Flora, Chemor, Perak with GDV of RM127m.
  • Recently announced Greater Bay Area plan to propel growth in Zhuhai and shall benefit LBS’ Zhuhai International Circuit (ZIC). Chinese authorities have unveiled the timeline to further integrate Hong Kong and Macau into the mainland under the ambitious Greater Bay Area plan to create a cluster of world-class cities in southern

China. The 11 cities in the Pearl River delta area would boost collaboration by 2022 in areas including the central pillar of science and technology, intellectual property rights and even ecological conservation. In October last year, the Y bridge was officially opened by Chinese President Xi JinPing. It is the world’s longest sea crossing bridge connecting Zhuhai-HK-Macao. With all these positive developments, we strongly believe that there are tremendous growth prospects for LBS’ ZIC which is strategically located in Zhuhai. Currently, the Group is still exploring viable options for its development of ZIC project and it would take another 3-6 months to finalise a proper plan.

Earnings Outlook/Revision

  • We slash our net earnings estimates for 2019F by 13.3% to RM108.7m after lowering our new sales assumption and progress billings. Also, we introduce our 2020F net profit forecast of RM121.8m. Our 2019F and 2020F net earnings estimates represent yoy growth of 27.9% and 12.0% respectively.

Valuation & Recommendation

  • Maintain BUY on LBS with a lower target price of RM0.98 (from RM1.06), which is now based on a wider discount of 40% (35% previously) to its RNAV/share of RM1.63 in order to better reflect current sluggish property outlook. Our target price also implies 14.5x 2019F FD PE.
  • LBS is our top pick in the sector as we favour the stock for its: a) Robust new sales amid prevailing soft property market, with the Group’s sound business strategy of concentrating in selling affordable landed housings especially in Klang Valley; b) strong earnings visibility underpinned by its healthy unbilled sales; and c) unlocking potential landbank values in Zhuhai International Circuit (ZIC), China. We advise investors to accumulate the stock in view of its current share price weakness.

Source: JF Apex Securities Research - 1 Mar 2019

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