Result

Meeting our estimate but above consensus. LBS Bina Group (LBS) achieved 2Q21 net profit of RM16.3m, more than doubled yoy but declined 35.3% qoq. Overall, 1H21 net profit of RM41.5m, surging 10 times yoy, which accounts for 55%/61% of our/market full year earnings estimates.

Comment

Better yoy but lower qoq. On yoy basis, the stronger quarterly results were mainly due to low base effect with longer non-operational periods under movement restriction control during 2Q20 as compared to this quarter of the year in which Full Movement Control Order (FMCO) only started in early June. Hence, we witness the higher contributions for both of its Property Development and Construction divisions. The same applies for its better 1H21 performance as construction activities were allowed to operate at full capacity during most of the time in 1H. Also, this was largely attributable to the good take up rates and steady construction progress from its on-going development projects at KITA@Cybersouth, Alam Awana, Skylake Residence, Residensi Bintang Bukit Jalil and Bandar Putera Indah. Development projects within the Klang Valley remained as the largest revenue contributor, accounting for more than 77% of the Group’s revenue for this period. On qoq basis, the weaker net earnings were due to the construction activities of all development projects were put on a halt for the full month of June 21 as a result of FMCO lockdown.

Steady sales amid current headwinds. Under prevailing difficult operating atmosphere, LBS still chalked up RM728m new sales and bookings of RM600m as of end August 21. The new sales account for 61% of its 2021 sales target of RM1.2b. Majority of sales were contributed by Klang Valley projects (88%), mainly from Kita@CyberSouth, Mercu Jalil and LBS Alam Perdana. The Group plans for a total GDV of RM1.2b project launches for 2H21 mainly in the Klang Valley. Going forward, the Group will extend its leverage on technology for its marketing efforts as well as increase efforts in digitisation to streamline and enhance efficiency within its business operations.

On-going and future projects to drive mid-to-long term growth. We are optimistic on LBS’ medium to long term growth as it is boasts sizeable landbank across various states which enables the Group for immediate launches and caters different market segments. Currently, LBS registered RM2.3b unbilled sales, which provides the Group’s earnings visibility for the next 2-3 years. The Group has 19 on-going projects with a total GDV of RM5.7b, land bank for future development of 3,343 acres with an estimated GDV of RM27.2 billion.

Earnings Outlook/Revision

No change to our net earnings estimates of RM74.8m (75.5% yoy growth) for 2021 and RM82.6m (10.5% yoy growth) for 2022.

Valuation & Recommendation

Maintain BUY on LBS with an unchanged target price of RM0.62. Our target price is pegged at PE multiple of 12x 2022F EPS. This is in line with its +1SD of 5-yr mean PE and current valuations of large-cap property counters which are trading at 12-15x forward 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 housing especially in Klang Valley; c) Strong earnings visibility underpinned by its healthy unbilled sales, on-going and future project developments; and d) Unlocking potential landbank values in Zhuhai International Circuit (ZIC), China in the medium-to-long term.

Source: JF Apex Securities Research - 1 Sept 2021