Result

• Better-than-expected result. LBS Bina Group (LBS) achieved 1Q22 net profit of RM30.2m, which surged 19.8% yoy but tumbled 14.9% qoq. Similarly, revenue increased 1.6% yoy but slid 7.4% qoq. 1Q result accounts for 33%/36% of our/street’s full year net profit forecasts. The stronger-than-expected result is mainly due to lower-thanexpected effective tax rate (1Q22: 38% vs our estimate of 45%) amid 1Q revenue constitutes 26% of our full year estimate and PBT margin just a tad lower than our forecast (1Q22: 13% vs our estimate of 12%).

Comment

• Better yoy but weaker qoq. The Group recorded stronger yoy performance (PBT up 2.3% but PATAMI was up by larger extent of 19.8%) mainly spurred by lower minority interests (MI) (1Q22: RM3.6m vs 1Q21: RM7.8m) following the weaker result posted by its subsidiary MGB Berhad for this quarter as compared to a year ago. This was also in line with its poor showing of its Construction & Trading division, as segmental PBT was down 16% yoy no thanks to rising cost of material and shortage of labour. Additionally, the Group’s PBT for its Property Development segment also slid by 5% yoy as bogged down by decrease in interest income and increase in operating expenses. During the quarter, top line and bottom line were driven by projects such as Residensi Bintang Bukit Jalil, LBS Alam Perdana and KITA@Cybersouth, all in Klang Valley, which contributed more than 80% of the Group’s revenue. On qoq comparison, the weaker result was mainly due to the timing differences of profit recognition as delivery of vacant possession of a project in KITA@Cybersouth in Dec 21.

• Property sales on track. LBS clinched RM593m property sales as of mid-May 22, which constitutes 37% of its 2022 sales target of RM1.6b. Majority of sales were contributed by Klang Valley projects (c.92%), mainly from Kita@CyberSouth, Mercu Jalil, and LBS Alam Perdana. Also, we understand that RM561m worth of bookings are pending for conversion into sales. Hence, we are sanguine on its sales outlook going forward. Besides, the Group boasted an unbilled sales of RM2.4b as of April 22, which underpins its earnings visibility for the next 2-3 years.

• Sizeable project launches in the pipeline. LBS targets to launch a total GDV of RM1.77b projects in the Klang Valley (KITA at Cybersouth, Alam Perdana, D’ Island residence), Johor (Bandar Putera Indah in Batu Pahat), Pahang (Bayu Hills in Genting Highlands) and Perak (Taman Kinding Flora, Chemor). Klang Valley will still be the major contributor, making up almost 63% of the total GDV of project launches.

Earnings Outlook/Revision

• We lift our 2022F and 2023F net earnings estimates by respective 12.2% and 5.6% to RM101.1m and RM111.6m following our adjustments on the effective tax rates.

Valuation & Recommendation

• Maintain BUY on LBS with an unchanged target price of RM0.62. Our target price is pegged at PE multiple of 10x 2022F EPS, which is in line with its 5-yr mean PE and current valuations of other mid and large-cap property counters which are trading at 10-12x 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 - 19 May 2022