• LBS Bina’s 1Q17 net profit of RM24.8m came in-line with ours and consensus full year estimates.

• Net profit rose by a robust 54.6% yoy on higher revenue, but fell 9.1% qoq.

• Total sales achieved from Jan-May 2017 jumped 36% yoy from RM299.9m to RM408.6m As expected the bulk of the sales came from its flagship projects namely Bandar Saujana Putra, D’Island and Desiran Bayu collectively contributed 58%.

• We expect FY2017 to be another record year for the group as we raise our net profit by 7.0% from previously, an increase of 30% from FY16.

• We upgrade to BUY from HOLD with a higher TP of RM2.53 (previous RM2.01) as we rolled over our valuation to FY18E.

A good start

LBS’s 1Q17 net profit rose 54.6% yoy to RM24.8m. The stronger earnings were lifted by higher revenue of 23.4%, which was in turn driven by more work progress on its development projects. Net profit however fell by 9.1% qoq on the back of a 23.2% decline in revenue. The lower profit qoq is attributable to Q4 being a seasonally high quarter.

To continue aggressively roll out projects

For 2017, the group is planning to roll out a total of RM2.33bn new projects, of which 86% are concentrated in Klang Valley with a clear focus on mass market segment. For FY17, the group is aiming a sales target of RM1.5bn, 21% higher than FY16’s actual sales. Almost all of these properties target the mass-market homebuyers as the projects’ residential units are expected to be priced lower than RM550 psf.

Moving into the big league

The group is expecting stronger sales in 2H17 coming from BSP 6, Skylake Residence and Alam Perdana. If LBS achieves its sales target of RM1.5bn this year and grows its sales further in 2018, the company could move into the same league as other bigger developers, such as Mah Sing which achieves annual sales of RM1.0bn.

We upgrade to BUY from HOLD with a TP of RM2.53 (previous RM2.01). We recently put our call under review, as we reassess our recommendation. We now reaffirm our BUY call as we revised higher our net income for FY2017 by 7.0% due to faster than-expected work progress from overall flagship projects following our meeting with management. We raised our TP to RM2.53 (previously RM2.01) as we rolled over our valuation to FY18E. We maintain our FY18 and FY19 forecasts. We expect a further re-rating of the stock due to its above-sector forecast earnings CAGR of 24% supported by its township projects.

Source: BIMB Securities Research - 31 May 2017