Result

• Earnings match expectation. LBS Bina Group (LBS) recorded a 4Q17 net profit of RM24.3m, down 13.8% yoy and 6.2% qoq. Overall, the Group posted full year 2017 net profit of RM103.4m, up 20.5% yoy and is in line with our estimate (meeting 98% of full year net earnings forecast) but below consensus (94%).

Comment

• Lower yoy and qoq. The weaker yoy and qoq performance for its 4Q17 bottom line was mainly due to decrease in interest income and other income such as one-off government grant received in 4QFY16 coupled with the increase in finance cost amid higher revenue achieved, +26.2% yoy, +15.5% qoq. Also, the higher effective tax rate for this quarter bogged down its qoq performance (4Q17: 48.1% vs 3Q17: 37.6%).

• Stronger full year results. The encouraging 2017 results were mainly underpinned by better revenue, +37.1% with higher progress billings from its on-going projects as well as good take-up rates for its new launches during the year.

• Strong start of the year. The Group successfully chalked up RM293m new sales for the first two months of the year (Jan-Feb 18), which constitutes 16% of the target new sales of RM1.8b set for this year, mainly driven by its Bukit Jalil project. We are impressed with the figure as market response during early of the year is typically soft due to spending constraints in relation to CNY celebration with Jan Feb sales traditionally contributed 8-13% of its actual sales for the past three years.

• Resilient unbilled sales underpin future earnings visibility. LBS chalked up RM1.4b new sales during 2017, which was 15.2% higher than RM1.2b sales achieved in 2016 and a tad lower than its target of RM1.5b. Meanwhile, the Group’s unbilled sales stood at RM1.4b as of Dec 17 or equivalent to 1.2x of its 2017 topline.

• Sizeable launches with major focus on affordable landed residences in Klang Valley. For 2018, the Group plans to launch 8 new projects with GDV worth RM2.2b. These include Bandar Saujana Putra (BSP) 6 and Rumah Selangorku, PPA1M Mercu Jalil and Residensi Bintang in Bukit Jalil, Alam Perdana PPA1M and landed residences, CyberSouth in Dengkil as well as affordable housings in Batu Pahat, Johor. This is in addition to the few on-going projects to be carried forward to 2018 with estimated GDV of RM1.4b.

Earnings Outlook/Revision

• No change to our net earnings forecasts for 2018F: RM123.3m (+19.2% yoy). Besides, we also introduce our 2019F net profit forecast of RM147.4m (+19.6% yoy). Our new sales assumptions of for this year and next year are RM1.7b and RM1.9b respectively.

Valuation & Recommendation

• Maintain BUY on LBS with a higher target price of RM1.30 (previously RM1.14 after Ex of share split and bonus issue), which is now based on 20% discount (from 30%) to its RNAV/share of RM1.63. We lower our discount to RNAV/share in order to better reflect its strong earnings visibility with the Group’s sound business strategy of concentrating in selling affordable landed housings for this year especially in Klang Valley.

Source: JF Apex Securities Research - 1 Mar 2018