• Our‎ recent‎ meeting‎ with‎ LBS‎ Bina’s‎ management‎ and‎ site‎ visit reaffirm our positive view on the company.

• Overall demand for the group’s‎ properties, namely its flagship project Bandar Saujana Putra, continues to be strong with another record sales of RM1.5bn expected in FY17, a growth of 21% yoy.

• Upcoming 2 new township in Ijok and Cybersouth will further solidify LBS‎ Bina’s branding in the affordable-priced properties segment.

• We forecast CAGR of 24% in earnings for the next 3 years. Strong sales to sustain earnings visibility

Launches from Bandar Saujana Putra (BSP) township for this year make up 25% of LBS’ total launches of RM2.33bn. Meanwhile, from what we gather from management, the latest launches of BSP21, a high-rise apartment, continued its robust sales momentum with average take-up rate of 80%, with majority of the buyers being first-time homebuyers. Cumulatively, total sales to be derived from BSP is expected to contribute RM622m or 41.5% to the group’s target sales of RM1.5bn for FY17.

Loan rejection rate is not a major concern for the group

Although current property market in Malaysia is still rife with high loan rejection rates, this issue does not have a significant impact on LBS as more than 50% of the group’s products are priced below RM600k. According to the group, the RM600K price, which we concur, is considered affordable for landed property segment in Malaysia. Furthermore, the group’s past two years’ project launches, particularly BSP and Desiran Bayu tend to cater to the affordable segments. Internally, rejection rates for LBS stands at c.20% versus market average of 50%.

Upcoming two flagship townships to sustain sales momentum

For FY2018 and beyond, the group has lined up several projects in Klang Valley and Johor. The 2 townships projects in Klang Valley are Alam Perdana in Ijok and CyberSouth in Dengkil, which are expected to bring in potential GDV of RM3.6bn and RM3.4bn respectively. Meanwhile for Johor, the group has a sizeable township of 1,232 acres located in Kulai, a suburb of Johor Bahru, which is expected to bring in potential GDV of RM4.8bn.

Valuation and recommendation

We recently upgraded our call from HOLD to BUY following release of 1Q17 earnings. We reaffirm our BUY view in this report. Our TP of RM2.53 is based on FY18F PER and PBV of 15x and 1.2x respectively. We expect a further re-rating of the stock mainly due to its above-sector earnings CAGR of 24% supported by strong sales

Source: BIMB Securities Research - 13 Jun 2017