LBS Bina (LBS) announced that it has entered into a Heads of Agreement (HOA) with Ancom Berhad, Nylex (Malaysia) Berhad, Sinar Bina Infra Sdn Bhd and BTS Group Holdings Public Company Limited for a collaboration to build and operate a light rail transport (LRT) system connected with the railway shuttle link currently being built from Singapore to Johor Bahru, with an integrated property development using the “Transit-Oriented Development” concept in Johor Bahru. Among the proposals in the HOA include (i) proposed joint venture in connection with the LRT concession and the development of such lands in Johor as part of the LRT Project; (ii) proposed acquisition by Nylex of 3 plots of land located in Johor from LBS measuring a total of 5.5acres at a consideration to be agreed by LBS and Nylex. Details are still light at this juncture, but we are positive with land monetization by LBS in Johor while the proposed JV could also leverage on the expertise of BTS Group Holdings, which is said to be involved in mass transit business in Thailand. No change to our earnings estimates for now as we maintain our Outperform call with target price unchanged at RM0.69 (50% discount to fully-diluted RNAV).

• HOA Details. We understand that LBS’ participation in the collaboration is via a proposed disposal of LBS’ land to Nylex for the LRT project, free of any encumbrances, at a consideration to be agreed by LBS and Nylex, satisfied via the issuance of new Nylex shares. The three plots of land identified measure 5.5 acres. The planned LRT project being studied under the feasibility study is projected to have an estimated carrying capacity of 15,000 passengers per hour per direction, matching that of the RTS Link currently being built from Singapore to Johor Bahru. The LRT project could span 75km with the initial phase of the LRT project within the Johor Bahru city centre to be approximately 9km.

• Location of land to be monetized by LBS comprises 3 plots contiguous to each other with a combined land area measuring approximately 5.5 acres. The land is said to be strategically located within the commercial area along Jalan Dato’ Dalam in the center of Johor Bahru City, the “Southern Gateway” of Malaysia, and lies under Zone A of the Iskandar Malaysia. The latter is a strategic development project encompassing an area of 2,217 square kilometers in total aimed at transforming Johor Bahru into a new urban metropolis of international standing. Zone A, in turn, is a district which allows easy access to transportation hubs such as the Zone Ferry Terminal with ferry routes to Indonesia and Singapore.

Source: PublicInvest Research - 22 Mar 2022