Result

• Stronger-than-expected result. LBS Bina Group (LBS) achieved 2Q22 net profit of RM35.1m, which soared 115.3% yoy and 16.2% qoq. Similarly, revenue increased 54.3% yoy and 0.3% qoq. Overall 1H22 net profit (+57.3% yoy) accounts for 65%/71% of our/street’s full year net profit forecasts. The better-than-expected result is mainly due to higher minority interest (MI) contribution stemming from weaker earnings contribution by its subsidiary MGB Berhad during the quarter (i.e. its Construction & Trading segment) in addition to higher PBT margin recorded (1H: 13.1% vs forecast of 11.5%) amid 1H revenue constitutes 51% of our full year estimate.

Comment

• Stellar quarter. On yoy comparison, the Group recorded stronger performance thanks to higher contribution from its Property Development segment in respect of better segmental topline (+58% yoy) and bottom line (+139% yoy). Moreover, LBS registered higher PBT margin (+3.4ppt yoy) also further aided the overall results. Likewise, the same applies to stronger 1H22 results underpinned by the continuous strong demand for its on-going projects at Bukit Jalil, LBS Alam Perdana, KITA@Cybersouth and Alam Awana Industrial Park. On qoq basis, the Group achieved higher earnings mainly due to higher minority interest (MI) contribution stemming from weaker earnings contribution by its subsidiary MGB Berhad during the quarter (i.e. its Construction & Trading segment).

• On track to hit yearly sales target. LBS clinched RM1.3b property sales (bookings on hand worth RM313m) as of mid-Aug 22, which constitutes 81% of its 2022 sales target of RM1.6b. Majority of sales were contributed by Klang Valley projects (92%), followed by Johor projects (4%), Pahang (2%) and Perak (2%). Among development projects in the Klang Valley, LBS Alam Perdana Township contributed to 29% (at RM383m), followed by project in LBS Kita@Cybersouth Township at 20% (at RM259m) and the third major contributor from its affordable housing project, Idaman BSP, at 17% (at RM218m). Besides, the Group boasted an unbilled sales of RM2.4b as of end-July 22, which underpins its earnings visibility for the next 2-3 years.

Earnings Outlook/Revision

• We lift our 2022F and 2023F net earnings estimates by 16.4% and 11.3% to RM117.7m and RM124.2m respectively after fine-tuning the MI contributions and PBT margins.

Valuation & Recommendation

• Maintain BUY on LBS with an unchanged target price of RM0.62. Our target price is pegged at PE multiple of 8.6x 2022F EPS, which is below its 5-yr mean PE of 10.3x and in line with current valuations of other mid and largecap property counters which are trading at 8-11x forward PE.

Source: JF Apex Securities Research - 23 Aug 2022