INVESTMENT MERIT

- Outperformed the market. Since our Trading Buy recommendation back on 23 May 2013 when the share price was traded at RM1.05, the stock has been fast approaching our fair value of RM1.43 (~+38%) in less than two months. Besides, it had also beaten the performance of FBM KLCI (+0.6%)  and KLPRP (-2.8%) during the same period. 

- Earnings growth remains intact. 1Q13 PBT improved 10.9% YoY to RM16.1m, which was pretty much in line with our full-year forecast of RM92m despite the quarter making up only 18% of our projection. We believe this was mainly due to project timing issue. Hence, we are maintaining our projections of net profits of RM56m (+22%) for FY13. The strong earnings growth for the year is mainly underpinned by one of the top margin projects known as Bandar Saujana Putra and D’Island Residence, which are mid to higher-end township developments.  

- Sale of Zhuhai’s asset nearing completion. Sale of Zhuhai’s asset nearing completion. Recall, the company proposed to dispose its Zhuhai’s investment in China (a 60% stake in a subsidiary which own a 197-acre development and golf & country club), which we believe will book in about RM240m one-off disposal gains (for further details please refer to our earlier report dated 23 May 2013). The EGM is being fixed on 19 July 2013 to seek shareholders’ approval on the disposal. Should the plan proceed smoothly, the management expects the exercise to be fully completed by 3Q13. We do not discount the possibility of the company rewarding shareholders after the completion of the said disposal proposal. 

- Hitting the ceiling. However, at the current price of RM1.43, LBS is trading at 9.8x FY13 PER which appears to be on the high side as compared to the average PER of 8.2x for the smaller cap property stocks. Furthermore, the share price has also exceeded our fair value of RM1.43, compelling us to believe  that its immediate upside could be hitting the ceiling. At this stage, we recommend investors to TAKE PROFIT with a view to re-enter on subsequent price weakness based on our earlier hypothesis (as mentioned in a previous report) that there could be a special dividend in 4Q13 after the completion of the proposal. 

TECHNICALS

- Resistance: RM1.57 (R1), RM1.62 (R2)

-  Support: RM1.32 (S1), RM1.15 (S2)

-  Comments:  Following an impressive run up post-GE13, LBS’s RSI indicator is now hovering at overbought levels. The MACD oscillator has also failed to make a new high, in contrast to the bullish view on the price action. Hence, we believe that the rally is losing momentum. As such, perhaps it may be time to lock in prior gains and look to re-enter closer to the RM1.30 resistanceturned-support.

BUSINESS OVERVIEW

A construction company founded in the 1960s, LBS ventured further into the property development sector in 1992. Its major accomplishments include Taman Perindustrian Bukit Serdang Seksyen 14 in Selangor (which was jointly developed with the 1992 Thomas Cup champions), Taman Pinggiran Putra, Serdang and the township project at Bandar Saujana Putra. LBS is now involved in property related activities such as investment holdings, property management, turfing and landscaping, insurance agency and building materials.

KEY ACTIVITIES

- Property development- development of residential, industrial and commercial properties. 

- Management and investment- investment holding and provision of management services. 

- Trading- trading in building material, insurance agent, and selling of membership and covering insurance. 

- Construction- building, project planning cum implementation contractor.

- Golf courses and club house- golf club development and management.

- Other business segments- selling of membership cards covering personal insurance and insurance agent.

Source: Kenanga