Results

• 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.

Source: JF Apex Securities Research - 26 May 2023