LBS Bina’s (LBS) 1HFY17 net profit of RM53.2m (+43.7% YoY) is within expectations at about c. 49% of our and consensus full-year estimates. 1HFY17 revenue of RM603.4m (+41.6% YoY) saw similarly robust growth, underpinned by an unbilled sales amount of just under RM1.4bn. Earnings visibility for the next 2 years are healthy, with upcoming launch plans and likely to extend this further. We continue to like LBS for its exposure to the mid-market segment of affordably-priced properties which stands it in better stead in current market conditions. Our Outperform call is retained with an unchanged target price of RM2.23 (30% discount to FD RNAV).

• Current sales. The Group continues to register encouraging numbers despite a slow market, with year-to-date sales (as at August) of RM796m close to last year’s RM827m in the corresponding period. Puchong remains a key driver with the Bandar Saujana Putra, D’Island and Desiran Bayu projects making up 45% (RM357m) of total sales. Hilltop living is seemingly gaining traction with Midhills (Genting) and Cameron Golden Hills (Cameron) collectively recording RM260m (32.7%). Target for the year remains unchanged at RM1.5bn, 25% higher than 2016’s RM1.2bn.

• Upcoming launch plans. The remainder of the year will see the Group launching some RM1.4bn worth of properties, the bulk of which will come from its Alam Perdana development (RM628m), whereby RM220m in new sales are targeted. Also slated for launch is RM388m worth of properties in BSP 6 in Bandar Saujana Putra, RM190m in Skylake Residences and RM170m in Bukit Jalil, in addition to the RM1.05bn already launched to date.

• Latest developments. On the upgrading and transformation of the Zhuhai International Circuit (ZIC) in China, the area’s council has managed to put through its plans for public viewing, in compliance with regulatory requirements, without any negative comments received. ZIC is now working on a resubmission of a more detailed conceptual plan which will encompass 3 components – motor sports, cultural and tourism. Options remain open for now, whether it be outright development sales or a joint venture as landowner, or even a separate listing of the entity. Whatever the case, monetization prospects are promising and are another re-rating catalyst. Recall also the Group recently acquiring, in July 2017, a 7.98-acre plot of leasehold land in the Seri Kembangan area with preliminary plans to develop 4 towers of serviced apartments with an estimated gross development value (GDV) of about RM600m. With an estimated 10% net margin, the project should enhance earnings by a further c.3%-5% per annum over the 8-year period of the development.

Source: PublicInvest Research - 30 Aug 2017