• Upgrade to BUY from Neutral, MYR0.72 TP, 33% upside and c.9% FY24F yield. LBS Bina’s 3Q24 results missed expectations, with lower revenue as certain projects were either completed or near completion. The group is unlikely to meet its MYR1.8nm sales target, attributed to deferred launches from lengthy approval process. Nevertheless, we upgrade our call after the share price correction as we think its longer-term outlook remains favourable with healthy take-up and a solid pipeline of new projects from its new township.

• 3Q24 results. Revenue was lower both QoQ and YoY due to the completion of certain development projects, but EBIT margins for 9M24 rose to 20.7% (9M23: 17.9%) – attributed to the group’s ongoing cost management efforts. Earnings were mainly derived from the group’s development projects at KITA @ Cybersouth, LBS Alam Perdana, Prestige Residence, and Idaman. After removing a one-off gain after tax of MYR137 from the disposal of Lamdeal Investments Ltd (which owns 60% stake in Zhuhai International Circuit (ZIC)), earnings declined 21% QoQ (-33% YoY) as it was brought down by higher finance costs due to a liability settlement.

• Behind its sales target. Property sales picked up QoQ to MY404m from MYR344m in 2Q24 (3Q23: MYR588m), but with just MYR1.2bn in sales YTD-Nov (attributed to deferred launches from lengthy approval process) and MYR217m booking in the pipeline, LBS is unlikely to meet its MYR1.8bn sales target for FY24. Unbilled sales stood at MYR1.7bn (FY23: MYR2bn), providing earnings visibility for the next few years.

• New township in Pahang. LBS officially launched the 315-acre Rimbawan Township in Genting Highlands in Oct 2024, with a GDV of MYR9.5bn, with its first project being the Bayu Hills serviced apartments (GDV: MYR453m). This new township – which plans to integrate with the local ecosystem alongside the river and waterfalls – should support the group’s long-term growth alongside KITA @ Cybersouth and Alam Perdana Central Hub which contributed MYR1.2bn in sales YTD-Nov.

• Special dividend. LBS declared a special dividend of 2.6 sen per share, or 30% of the gain after tax from the disposal of ZIC. This effectively doubles our dividend estimate for FY24, raising the yield to c.9%.

• Earnings forecast. We lower our FY24F-26F forecasts by 10%, 4%, and 4% as we lower our sales assumption. Our TP is premised on a 65% discount to RNAV, and it includes a 2% ESG premium. Key risks include softer-than- expected property market, delayed project launches, and rising competition.

Source: RHB Securities Research - 2 Dec 2024