Result

• Earnings on track. LBS Bina Group (LBS) registered 4Q20 net profit of RM18.4m, rising 25.2 % yoy but declining 8.9% qoq. For its full year 2020 result, the Group recorded RM50.7m net profit, which fell 24.9% yoy. The result is in line with our forecast, accounting for 103% of our full year earnings estimates.

Comment

• Higher yoy but lower qoq. The stronger yoy results were mainly due to higher contributions from property development division (segmental PBT: +2.0%) and Motor racing circuit in Zhuhai, China (segmental PBT: +53042%) pursuant to one-off write back of provision for claims. During 2020, projects such as LBS Alam Perdana, Kita@CyberSouth, Residensi Bintang Bukit Jalil, Skylake Residence and Cameron Golden Hills were the main contributors of top line. Notably, projects in Klang Valley constitute more than 75% of the Group’s total revenue. Meanwhile, the weaker qoq results were mainly due to slower progress billings from its on-gong projects (top line: -17.9% qoq) coupled with higher effective tax rate (4Q20: 63% vs 4Q19: 57%).
   
• Resilient new and unbilled sales. LBS chalked up RM101m new sales as of mid Feb 21 with its 2021 sales target of RM1.2b (on par with 2020 actual sales of RM1.2b). We believe majority of new sales for this year will be driven by Klang Valley projects, mainly from its township developments such as Kita@CyberSouth and LBS Alam Perdana. Meanwhile, the Group registered RM2.2b unbilled sales as of end Jan 21, which provides the Group’s earnings visibility for the next 2-3 years.
   
• Sizeable launches to capitalise on 2H economic recovery. The Group plans for a total GDV of RM2.7b project launches for this year. These are Kita@CyberSouth (GDV of RM868m), LBS Alam Perdana (GDV of RM457m), Bayu Hills at Genting Highlands (GDV of RM421m), Mercu Jalil at Bukit Jalil (GDV of RM373m), Prestige Residence at Seri Kembangan, among others.

Earnings Outlook/Revision

• No change to our earnings estimates.

Valuation & Recommendation

• Maintain BUY on LBS with an unchanged target price of RM0.53. Our target price is pegged at 12.7x 2021F PE. We favour the stock for its: a) Commendable sales amid prevailing soft property market, b) Sound business strategy of concentrating in selling affordable landed housings especially in Klang Valley; c) Strong earnings visibility underpinned by its healthy unbilled sales; and d) Unlocking potential landbank values in Zhuhai International Circuit (ZIC), China in the immediate future.

Source: JF Apex Securities Research - 26 Feb 2021