• LBS’s 9M16 net earnings met ours and consensus expectations at 74% of full-year forecast.

• The group sold a total of RM906m worth of properties in 9M16 (9M15: RM817m). Management remains confident that its full-year sales target of RM1.2bn will be met.

• Total dividend declared year-to-date is 6 sen. We expect a total of 9.5 sen DPS to be dished out for FY16.

• We maintain our EPS and TP. Stronger sales and rising profit are the key potential re-rating catalyst. Sales remain robust. The strong take-up is driven by its flagship township project Bandar Saujana Putra (BSP), and D’Island with combined total sales of RM846m. As of Nov-16, total sales achieved have reached 96% of our sales target of RM1.2bn.

Outperforming in spite of the tough market. The strong performance year-to-date reinforces our view that LBS will outperform its peers in terms of sales and earnings growth in the current tough environment. We also favour the group’s recent acquisition of 638-acres land in Dengkil with a potential GDV of more than RM2.0bn. We expect its maiden launch could take place as soon as next year. We expect this to be another flagship mass-market township development for the group after BSP in Jenjarom. Hence this should strengthen LBS’s sales visibility in the next few years.

A good proxy for a defensive stock. We maintain BUY with TP of RM2.01 derived from a blended valuation of PE and PBV of 15x and 1.0x respectively. Rising sales, improving earnings and attractive dividend yield of 5-6% in 2016-2017 are the reasons to own this stock.

To continue aggressively roll out projects. As of 28th Aug-16, a total of RM910m projects have been launched during the year with RM827m sales or 91% fully-taken up. This underlies the strong demand for its affordably-price houses in BSP. LBS has planned several launches totalling RM384m for the remainder of the year, hence total projects to be rolled out will come up to RM1.3bn against the group’s initial target sales of RM1.2bn. In addition, the group’s strong unbilled sales of RM1.46bn are sufficient to support group’s earnings at least for the next two years.

Fundamentals remain strong. As of 9M16, group’s unbilled sales and total remaining GDV continue to be solid at RM1.46bn and RM21bn respectively. Meanwhile, remaining undeveloped landbank stood at 2,520 acres with the bulk coming from Johor at 50% followed by Klang Valley at 23%, Perak at 19% with the remaining from Pahang and Sabah.

Source: BIMB Securities Research - 30 Nov 2016