Maintain NEUTRAL, new MYR0.72 TP from MYR0.93, 7% upside. LBS Bina’s 2Q24 results met expectations, with improved revenue following an increase in on-site development activities. We are cautious on the group missing its MYR1.8bn sales target as 1H24 sales only reached MYR559m. We raise our discount to RNAV to 65% from 55% as we highlight the potential cancellation of the Johor LRT project, given the lack of progress.
Results in line. 2Q24 core profit of MYR34.8m (+14% QoQ, +6% YoY) brought 1H24 earnings to MYR65.3m (+3% YoY). This is broadly in line with expectations at 47% of ours and 45% of Street’s estimates. 1H24 revenue increased 2% YoY with the increase in on-site development activities, and EBITDA margin was stable at 21.6% (1H23: 21.4%). Earnings were mainly derived from the group’s development projects at KITA @ Cybersouth, LBS Alam Perdana, Prestige Residence, and Idaman.
Property sales picked up QoQ to MYR344m from MYR216m, but 1H24 sales of MYR559 lagged behind YoY (1H23: MYR775m). With YTD-Aug sales at only MYR794m and MYR293m in bookings, we are cautious of the group missing its sales target (MYR1.8bn) for the second consecutive year. That said, on top of the MYR1.6bn launched YTD, LBS is planning to launch a further MYR1.4bn later this year, which should underpin sales in 2H24. These mostly consist of projects in Klang Valley and Pahang. Average take- up rates for its ongoing projects remain strong at 71%, but unbilled sales decreased to MYR1.7bn from MYR1.9bn as at end-2023.
Johor LRT project. Recall, LBS (being part of the consortium) entered into a Heads of Agreement (HOA) in Mar 2022 to build and operate a light rail transit (LRT) system in Johor. As part of the agreement, LBS would inject 5.5 acres of land in the Johor Bahru city centre into the JV, allowing it to monetise on the premium land acquired in 2013. While the project is officially still in the midst of obtaining the concession with the HOA extended to 31 Jan 2025, we are turning negative on the project’s prospects as the state government has pivoted to prefer an autonomous rapid transit (ART) system over LRT, citing lower MYR7bn cost compared to MYR17bn. The final decision would rest on the federal government.
Earnings forecast. We lower our FY25F and FY26F forecasts by 4% as we lower our sales assumption. We also raise our discount to RNAV to 65% from 55% due to the potential cancellation of the Johor LRT project, which lowered our TP to MYR0.72 (includes a 2% ESG discount). Key risks include softer/stronger-than-expected property market, delayed project launches, and rising competition.
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