• Keep BUY, higher MYR0.80 TP from MYR0.56, 56% upside and 5% yield. Apart from the few big-cap developers we highlighted over the past few weeks, LBS Bina is another Johor thematic play many may have overlooked. Together with a few parties, it plans to jointly develop a light rail transit (LRT) project in Johor Bahru (JB) city centre with some transit-oriented development. A feasibility study is currently ongoing. We think the consortium will likely unveil further progress in late 2023 or 2024.

• LRT proposal in JB. Recall: In Mar 2022, LBS entered into a head of agreement (HOA) with Ancom, Nylex, Sinar Bina Intra (SBI), and BTS Group (BTS TB, NR) to collaborate in building and operating an LRT system. Dato’ Avinderjit Sing A/L Harjit Singh and Tunku Abdul Majid Ibni Sultan Iskandar are the 70:30 shareholders of SBI. LBS will inject 5.5 acres of land in JB city centre into the JV for transit-oriented development (TOD). The LRT is projected to have an estimated carrying capacity of 10-15k passengers/hour each way, matching that of the JB-Singapore Rapid Transit System or RTS that is currently under construction. According to the HOA, the LRT project may span 75km with c.9km initial phase within JB’s city centre. BTS has been appointed to commission a feasibility study, while LBS or its affiliate will be the preferred civil and construction contractor for the LRT and property development project.

• Holding valuable land in JB city centre. There is a scarcity of land at JB city centre. LBS acquired its 5.5-acre site at Jalan Dato’ Dalam for only MYR114m or MYR476psf in 2013. Based on our checks with a few players, we gather that land parcels in the city centre may be worth MYR550-700psf now, suggesting a potential gain of c.MYR30-40m upon LBS’ injection of the land into the JV Co (depending on its effective stake in the JV). This land, which is c.3-5km away from the Bukit Chagar RTS station, carries an estimated GDV of MYR2.3bn for now, ie 7% of the total GDV portfolio. Apart from Jalan Dato’ Dalam, LBS also owns seven acres in Danga Bay and one acre at Taman Molek.

• A small involvement in a big project. LBS is not a big player in the Iskandar Malaysia property market, but we view its potential involvement in the LRT and TOD projects favourably. JB city centre is in the midst of enhancing its cross-border connectivity. Hence, the LRT project (which should connect to the RTS station), if it materialises, would provide greater inter-city convenience to travellers from Singapore. Although LBS will unlikely take the lead in the consortium, we think both LBS and MGB (MGB MK, BUY, TP: MYR1.10) will likely benefit from the proposals.

• Higher TP. As we update our RNAV estimate, our new TP is based on a 60% discount to RNAV from 65% to reflect better market sentiment ahead post state elections. Our TP has a 0% ESG premium/discount.

Source: RHB Securities Research - 25 Aug 2023