Result

• Positive surprise. LBS Bina Group (LBS) achieved 4Q21 net profit of RM35.5m, which soared 71.5% yoy and 96.1% qoq. For full year 2021 result, the Group recorded net profit of RM95.1m, surging 115.2% yoy, which exceeds our/market full year earnings estimates by 22-23%. The result is above our expectation mainly due to stronger margins achieved (PBT margin: 13.5% vs our full year estimate of 11.3%) and lower effective tax rate (tax rate of 35.7% vs our estimate of 41%) amid full year revenue meets 105% of our full year topline forecast.

Comment

• Commendable yoy and qoq results. LBS achieved better yoy and qoq results mainly underpinned by its Property Development and Construction & Trading segments with higher segmental top line and bottom line. This was due to stronger property sales, higher recognition of progress billings on the back of rapid construction progress coupled with cost savings from completed construction contracts. Also, the stronger qoq performance was further aided by lower effective tax rate. For full year 2021, the better performance was due to the sale of inventories, good take up rates and steady construction progress from its on-going development projects at KITA @ Cybersouth, Residensi Bintang Bukit Jalil, Alam Awana Industrial Park and LBS Alam Perdana. Development projects within the Klang Valley remained as the largest revenue contributor, accounting for more than 80% of the Group’s revenue for the FY2021.

• Sales surpassed target. LBS clinched RM1.58b new sales for 2021, which exceeds its 2021 sales target of RM1.2b. Majority of sales were contributed by Klang Valley projects (c.90%), mainly from Kita@CyberSouth, Mercu Jalil, Prestige Residence and LBS Alam Perdana. Meanwhile, LBS achieved RM2.3b unbilled sales as of Dec 21, which provides the Group’s earnings visibility for the next 2-3 years. Going forward, the Group aims for RM1.6b property sales for the FY2022. There will be 14 new project launches totalling a gross GDV of RM1.77b, consisting of 3,733 units in the Klang Valley, Johor, Pahang and Perak. Klang Valley makes up almost 70% of the total with 2,604 units, accounting for a GDV of RM1.11b through KITA at Cybersouth township and Melodi Perdana at Alam Perdana township. The other new projects include Bayu Hills in Genting Highlands, and Bandar Putera Indah in Batu Pahat, Johor.

Earnings Outlook/Revision

• We increase our 2022F and 2023F net earnings estimates by respective 16.3% and 29.6% to RM90.1m and RM105.7m following the higher sales in 2021 and revising upwards of our sales projection to RM1.6b from previous RM1.2b for 2022-2023.

Valuation & Recommendation

• Maintain BUY on LBS with an unchanged target price of RM0.62. Our target price is pegged at PE multiple of 11x 2022F EPS, which is slightly above its 5-yr mean PE and in line with current valuations of other mid and large-cap property counters which are trading at 10-13x 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 - 25 Feb 2022