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Wednesday, November 30, 2016

Brokers Report: LBS Bina - Going Strong



Maintain outperform with an unchanged target price (TP) of RM2.23



The Group’s 9MFY16 net profit of RM57.5m (+8.4% YoY) came in within expectations, at 73% of our and 74% of consensus full-year estimates. With the group currently undertaking 16 on-going projects against the backdrop of a record-high unbilled sales amount of RM1.46bn, the company remains primed for sustained growth in the coming few financial years, particularly owing to its predominant focus on affordably-priced properties which stand it in better stead. Recent corporate exercises in which 1) the construction division was spun off into ML Global and 2) land acquisitions in Dengkil and Alam Perdana, are positive and underscores management’s focus on long-term shareholder value creation. While we leave FY16 estimates unchanged, we are lifting FY17 and FY18 net profits by 15.1% and 22.2% respectively, scaling back on our previously-conservative sales assumptions. Our Outperform call is affirmed with an unchanged target price of RM2.23 (30% discount to FD RNAV).
  • Brisk business in Q3, with RM462m worth of properties sold in this one quarter alone and almost doubling Q2’s RM238m sales done. Bandar Saujana Putra continues to be a key driver to the Group’s earnings growth, with RM549m sold to-date. Other major contributors for the year are the D’Island and Desiran Bayu projects in Puchong (RM195m and RM245m respectively) while Cameron Golden Hills, Bandar Putera Indah, Sinar Mahkota and Midhills chimed in with a collective RM162m. Sales to-date (as at 20 November) now totals RM1.15bn, with its annual RM1.2bn target more than likely being met. Despite the challenging market environment, LBS’ current quarter sales has even outstripped the previous corresponding period’s RM372m, let alone outpacing Q1 (RM266m) and Q2 (RM238m) this year, reflection of the Group remaining focused on the customer segment it does and knows best, the mid- and mass-market segment which continues to see steady demand and financing availability.
  • 2017 guidance. Management has indicated launches to the tune of RM1.55bn next year, c. 20% higher than 2016’s RM1.29bn. Sales mix is anticipated to be more spread out, with launches in flagship Bandar Saujana Putra only contributing RM330m (21%). Other major project contributors are its Bukit Jalil project (RM341m, 22%), the Langit and Lake project in Bandar Putra Perdana (RM361m, 23%), D’Island Residence (RM258m, RM17%), Centrum @ Cameron Highlands (RM183m, 12%) and Desiran Bayu (RM77m, 5%).
  • Healthy earnings visibility. A major plus point for the Group remains the fact that most of its current developable land bank was acquired years ago in which costs were much lower, giving it the flexibility to alter its product mix to address whatever market cycle. Current unbilled sales at a record-high of RM1.46bn, coupled with its planned launches next year will underpin earnings visibility for the next 2-3 years.


Source: PublicInvest Research - 30 November 2016

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