A Good 1Q Overall – LBS Bina Group (LBS) started the year well with revenue having a mixed performance at RM384.9m (QoQ: +3.3%; YoY: -5.9%) while better performance can be seen for their earnings at RM30.5m (QoQ: +19.2%; YoY: +1.0%). Margins were showing improvements in the quarter where GP has improved to 30% (QoQ: +4.4%; YoY: +2.5%) due to the overall lower cost of sales achieved which led to the overall better performance in the bottomline.
Property sales start on the low end – In 1Q23, property sales achieved were both lower at RM304m (QoQ: RM455m; YoY: RM373m). Currently, the sales contribution from Klang Valley projects remains the biggest pie at 92%, followed by Pahang (5%), Johor (3%), and this time none from Perak (0%). The Group has set an identical sales target of RM2b for FY23 and has so far achieved 25% of that target as of May 18. Unbilled sales stood at RM2.4b which paves the way for clear earnings visibility for the next two to three years.
Core Business Maintains Growth – The property development and construction segment showed positive growth QoQ at 4.3% and 23.1% respectively but negative YoY at -6% and -3% respectively while being offset by the mixed performance of other smaller business segments.
Good PBT Segment Performance – Despite achieving a lower revenue QoQ and YoY in the property and construction segment, PBT for both segments jumped to RM49.5m (QoQ: +98%; YoY: -5%) and RM13.5m (QoQ: 187.2%; YoY: 23%) respectively as they manage to achieve cost savings from completed construction contracts derived from their in-house construction arm.
5 New Projects Launched so far – As of 30th April, the Group has launched a total of 5 projects with a combined GDV of RM1.4b with a remaining GDV of RM699m left to be launched within 1H23.
Earnings Outlook/Revision
Forecast maintained – We do not see a need to make any alternations as of now as earnings are within expectation.
Valuation & Recommendation
Maintain BUY with a higher target price of RM0.63 (from RM0.61). Our revised target price is pegged at a 6.7x PE (previously 7.0x PE) multiple to the Group’s 2024F diluted EPS at -1 Standard Deviation of its 5-year historical mean PE which is in line with our overall less optimistic outlook of the sector caused by the recent interest rate hikes which could affect demand.
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....