LBS Bina’s (LBS) 3QFY21 net profit came in at RM18.1m (-7.0% YoY, +11.4% QoQ), bringing YTD net profit to RM59.6m (+153.7% YoY), which was within our and consensus estimates at c.79% of the full-year numbers. Earnings are kept unchanged for now given the tough operating environment but we believe group billings to continue to be underpinned by its strong unbilled sales in excess of RM2bn and its annual sales replenishment rate of ~RM1bn. All told, we maintain our Outperform call given its attractive investment proposition and entrenched position as a leading player in the domestic mass-market affordable housing segment. Target price is unchanged at RM0.69 (50% discount to fully-diluted RNAV), with the lower discount vis-à-vis its peers on account of its ability to monetize its land bank acquisitions/joint ventures quicker than the rest.

• 2021 launch updates. Management has revised planned project launches that originally had 11 projects with gross development value (GDV) of RM2.66bn to 6 projects worth only c.RM1.6bn now. Among the deferred projects include Bayu Hills (RM430m GDV) and Melodi Perdana (RM119m GDV) which are now likely to be unveiled in 2022. Again, Klang Valley based projects is making a bulk of the launches, with c.RM1.43bn of products (of c.RM1.6bn) and the Group is set to unveil the remaining RM190m worth of projects in Q4FY21 mainly from LBS Alam Perdana (RM158m GDV) and Bandar Putera Johor (RM32m GDV).

• On track to meet FY21 sale target. Group unbilled sales rose to RM1.06bn as at Nov 2011 from RM728m in sales in Aug, which we believe that should see it able to meet its FY21 sales target of RM1.2bn. Take-up, we understand, is still encouraging with total launched projects in its on going projects about 90% sold. The Group has launched c.RM1.4bn worth of projects so far in FY21 and has about RM190m remaining to be launched this year. Bookings in the pipeline are RM956m as at Nov 2021.

• Other developments. With regard to its reclamation and development agreement (RDA) with the state government of Melaka for about 1,200 acres, the Group is currently gauging interest from key investors while also conducting all relevant studies (ie. environmental impact assessment, etc). The Group’s plot of land the Zhuhai International Circuit (China) remains a wild card, though a very lucrative one should it be able to monetize the asset. No further developments have been disclosed pursuant to the lapse of its Memorandum of Understanding with Zhuhai Jiuzhou Holdings Group Co. Ltd. for a proposed sale, though the Group still remains open to all options. LBS has already obtained approvals for the upgrading and transformation plan – to start work latest by November 2022.

Source: PublicInvest Research - 24 Nov 2021