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Monday, June 6, 2016

LBS BINA GROUP BERHAD - Surprise Payment



The Group announced the early receipt of HKD200m from Zhuhai Holdings, being the final of 4 deferred payments from 2014 to 2017 pursuant to its sale of Lamdeal Consolidated and Lamdeal Golf and Country Club Limited to the latter in a HKD1.65bn (RM681m) cash and share deal. This comes as a pleasant surprise given that the amount is not due till end-2017, though very much welcomed toward the strengthening of its balance sheet, while also according shareholders a special dividend. We see the Group primed for sustained growth in the coming few financial years, underpinned by the on-going launches of its affordably-priced properties. We maintain our Outperform call with an unchanged target price ofRM2.08 based on a 30% discount to its fully-diluted RNAV, the lower discount justifiable in our view given the ability of the Group to easily monetize its land bank in the current market environment, relative to its peers.

Recall that the transaction entered into in 2013 was to have been satisfied by 1) HKD500m in cash, 2) HKD300m for 225.5m shares in Zhuhai Holdings at HKD1.33 per share (LBS has since sold some 1/3 of its shares at prices ranging between HKD1.40 and KHD1.75 each) and 3) HKD850m of promissory notes, with the following settlement schedules:-

TrancheHKDmnRemarks
2014250Settled
2015200Settled
2016200Received 16 March, 2016
Total850Received 3 June, 2016

A bulk of the proceeds will be utilized to pare borrowings (HKD123.8m of RM66.3m) while about 30% (as planned) will be paid out as a special dividend (HKD65m or RM34.8m (6.2sen per share)).

Big plans in China. Local government approvals are being procured to upgrade and transform the racing circuit land it still owns into an integrated tourist attraction. On it will be a commercial mall, an exhibition hall, a sports center and a hotel, all built in the vicinity of the racing circuit which will be maintained. The upgrade will also include a Melaka cultural museum, a one-stop tourist center and exhibition hall.

LBS does have various options with regard to the land. Offers are already on the table, partnership with a China-based developer to jointly develop the land parcels amongst one of them. An outright sale has not been entertained as yet, though is not ruled out either. Conservatively ascribing the similar selling price which was transacted in 2013, the 264-acre parcel is worth some RM411m to shareholders of LBS, close to half its current market capitalization.


Source: PublicInvest Research, 06 June 2016

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