• Maintain BUY and MYR0.63 TP, 29% upside with c.1% FY22F yield. We are mildly positive on LBS Bina’s participation in the proposed light rail transit (LRT) project in the Johor Bahru city centre, as the company will be able to monetise its land there at the same time, if the project is approved. However, the approval process for this mega infrastructure project may take a long time. As such, we make no changes to our earnings forecasts and valuations for now.

• Participating in the LRT project in Johor. LBS has entered into a heads of agreement (HoA) with Ancom, Nylex (M), Sinar Bina Infra (SBI) and Thailand’s BTS Group, to participate in the collaboration to build and operate an LRT system. This will be connected to the Johor Bahru- Singapore rapid transit system (RTS), as well as an integrated property project using the transit-oriented development concept in the state capital. The LRT project is subject to the feasibility study being completed, and the grant of the concession award for the LRT project by the Johor State Government. LBS’ participation is via a proposed disposal of land spanning around 5.5 acres, to be satisfied via the issuance of new Nylex shares. Dato’ Avinderjit Singh a/l Harjit Singh and Tunku Abdul Majid Ibni Sultan Iskandar are the shareholders of SBI, whose role is to liaise with the state government and procure the LRT concession.

• Manageable commitment from LBS. In our opinion, the collaboration represents an opportunity for LBS to monetise its land in the Johor Bahru city centre, and participate in an infrastructure concession in Malaysia. LBS’ land is located within the commercial area along Jalan Dato’ Dalam in the city centre, less than 3km from the RTS station at Bukit Chagar. We also understand that LBS will not likely contribute further equity in the consortium, apart from the disposal of its land to Nylex. Its potential participation in the project will probably just be one of the contractors (the HoA stated that LBS or its affiliate will be the preferred civil and construction contractor for the LRT project).

• Expect long approval process. We think the government’s approval for this LRT project will likely take a long time, possibly 6-12 months, as various approvals and processes are involved, especially funding, commercial viability, rail network alignment, land acquisition etc. According to the announcement, the LRT project could span 75km with the initial phase of the LRT project within the city centre to be around 9km.

• We make no changes to our earnings forecasts and valuations, pending the official green light from the state government for this project. Our TP is based on a 60% discount to RNAV. There is no ESG premium or discount applied as the group’s ESG score of 3 is on par with our country median.

Source: RHB Research - 23 Mar 2022