Result

• Earnings above expectations. LBS Bina Group (LBS) recorded a strong 4QFY16 net profit of RM28.2m, soaring 22.6% yoy and 37.6% qoq. Cumulatively, the Group’s full year net profit of RM85.8m (+12.9% yoy) exceeded our and consensus estimates by respective 6% and 11%. The better-than-expected net profit was mainly due to higher progress billings.

Comment

• Commendable 2016. LBS recorded a stellar full year results with bottom line increasing 12.9% yoy on the back of higher top line, +46.0% yoy. The improved performance was mainly attributable to higher sales and progress billings from its on-going projects such as Bandar Saujana Putra, D’Island Residence, Cameron Golden Hills, Bandar Putera Indah, Sinaran Mahkota, Midhills, Alam Awana and Desiran Bayu.

• Stunning sales success continued. LBS chalked up remarkable new sales of RM1.2b in 2016 (vs 2015: RM1.0b, 2014: RM645m), unfazed by the subdued property market. Moving forward, the Group aims a higher sales target of RM1.5b this year, banking on its new launches of two township projects, which are strategically located at Ijok and Dengkil in Klang Valley besides its current flagship project in Bandar Saujana Putra. Meanwhile, the Group’s unbilled sales expanded further to RM1.4b or equivalent to 1.4x of its 2016 topline.

• Sizeable GDV and landbank underpin future earnings growth. The Group currently has 15 on-going projects with GDV of RM3.1b whilst having vast remaining landbank of 3,518 acres with future GDV of RM27.2b. The Group’s sizeable landbank well spread across different localities such as Klang Valley (48%), Johor (33%), Perak (13%), Pahang (5%), and Sabah (1%).

• Slew of launches in the pipeline. For 2017, LBS aims to launch projects worth RM2.3b of GDV with 86% of sales value concentrated in Klang Valley. List of launches include:
  
  a) BSP in Southern Klang Valley – 5 blocks of serviced apartments with total GDV of RM678m;
  b) Langit & lake in Southern Klang Valley – 2 blocks of service residences with total GDV of RM372m;
  c) Desiran Bayu, Puchong – 130 units of 2 storey cluster link and semi-D with total GDV of RM92m;
  d) Bukit Jalil – serviced apartments (PPA1M) with GDV of RM170m;
  e) Alam Perdana, Northern Klang Valley - 1138 units of 2 storey link, townhouse with total GDV of RM420m;
  f) CyberSouth, Dengkil, – 618 units of 2 storey terrace with total GDV of RM278m;
  g) Bandar Putera Indah, Batu Pahat – terrace homes with GDV of RM96m;
  h) Golden Hills, Cameron Highlands – 2 storey terrace homes with GDV of RM59m.
  i) Centrum, Cameron Highlands – 58 units of shops with GDV of RM184m.

Earnings Outlook/Revision

• We nudge higher our 2017F net income by 3.0% to RM105.1m and also introduce 2018F net profit of RM123.0m. Our 2017F and 2018F net profit represent yoy growth of 22.5% and 17.0 respectively.

Valuation & Recommendation

• Maintain BUY on LBS with a higher target price of RM2.10 (from RM1.94) after lowering our discount to RNAV/share of RM3.23 to 35% from previous 40% in view of better sales visibility with the launching of two new township projects, Aman Perdana and CyberSouth in Klang Valley this year. Our target price also implies 14.4x 2017F FD EPS.

• We favour LBS for its: a) resilient sales and clear earnings visibility amid current property headwinds; b) diversified product offerings and geographical exposures (mid to high end property across Klang Valley, Pahang, Johor, Perak, Sabah); c) focusing on affordable housing segment; d) attractive annual dividend yield of over 5%; and e) unlocking potential landbank values in Zhuhai International Circuit (ZIC) with current advocate of ‘One belt, One Road’ initiative amid stronger Malay

Source: JF Apex Securities Research - 28 Feb 2017