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Thursday, January 25, 2018

RHB Research starts coverage on LBS with Buy call

ANALYST REPORTS
Wednesday, 24 Jan 201811:24 AM MYT

KUALA LUMPUR: RHB Research starts coverage on LBS Bina with a Buy call and target price of RM2.71 (17% upside) as it continues to achieve record core earnings through to 2019.

It said on Wednesday the past three to four years of strong showing across major operating metrics and financial performance have affirmed the group’s strong business strategies, execution capabilities, and core strength in the affordable housing segment.

“We view its pipeline of planned launches for 2018 favourably, and see the group reaching new sales of RM1.6bil (LBS is targeting RM1.8bil) vs RM1.4bil in 2017.

“This is despite expectations of a soft domestic property market. Key share price catalyst for 2018 would be news flow relating to its monetisation efforts on the 264-acre Zhuhai International Circuit (ZIC) land,” it said.

RHB Research expects LBS Bina to continue achieving record core earnings through to 2019, ie the end of its current forecast period.

This is hinged on its ongoing gross development value (GDV) of RM3.6bil, which is at multiple stages of completion, and unbilled sales of RM1.52bil (1.4 times of 2017F revenue), which have been rising over the past four years.

The strong unbilled sales reflect successful new launches, where new sales more than doubled during 2014-2017 (to RM1.43bil).

“Although we expect competition to continue rising, we believe the group would be able to achieve new sales of RM1.6bil (vs LBS’ target of RM1.8bil) in 2018, given its planned launches for
2018 based on location, price range and product type.

“While the group slowed down its landbanking activities in 2017 – a net increase of 274 acres vs 865 acres in 2016 – its landbank of 3,806 acres with an estimated GDV of RM29bil should keep the group busy for the next seven to eight years.

“Hence, on the back of sufficient landbank over the near term, we believe LBS would adopt a rather organic and opportunistic landbanking strategy,” it said.

RHB Research said LBS Bina is exploring and narrowing down its option(s) to maximise the value of its 60% interest in the ZIC land.

Therefore, the resarch house believes news flow on this front over the next 12 months would be a key share price driver.

Read more at https://www.thestar.com.my/business/business-news/2018/01/24/rhb-research-starts-coverage-on-lbs-bina-with-buy-call/#AbbEZzfAjWEe4qFF.99

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