News Column

LBS Bina rises to 2-month high on Johor land deals

February 17, 2014

Sharen Kaur

KUALA LUMPUR: LBS Bina Group Bhd's shares rose to a two-month high after the company announced a new land deal in Johor.

The stock closed 14 sen higher to RM1.65 yesterday.

Last week, LBS Bina bought 1.73ha in Iskandar Malaysia, Johor, from the Employees Provident Fund (EPF) for RM71.82 million.

Seven months ago, it acquired a 0.5ha plot in the same vicinity for RM42 million.

LBS Bina said it will develop both land parcels into a mixed development worth RM2 billion, which is a fourfold increase in gross development value (GDV) for the proposed project.

When LBS Bina acquired the first piece of land last July, it had said the GDV would be around RM500 million. But after the second deal, it decided to combine both land parcels to create a larger development.

JF Apex Securities Bhd has maintained a "buy" call on LBS Bina with a target price of RM2.32, based on a 50 per cent discount to its revalued net asset value of RM4.64.

The research house said in a research note it is in favour of the stock for its attractive dividend yield of more than six per cent, aggressive landbanking exercises and strong earnings growth.

It estimates that the RM2 billion project will contribute around RM62 million to net earnings per annum. This is based on gross development margin of 33 per cent over eight years.

JF Apex does not discount the possibility of a potential GDV price revision in the future as LBS Bina has said the project will most likely commence in fiscal year 2016.

LBS Bina also wants to avoid the current "perceived" property glut in Iskandar Malaysia.

"We opine that the revenue and earnings contribution for the Johor project will only materialise in 2016. Hence, there would not be changes to forecasts for this year and next year," it said.

LBS Bina's earnings are on an upward trajectory.

The company returned to profit in 2010 and has maintained its earnings momentum since then, after re-strategising its business model and product offerings.

JF Apex expects LBS Bina's fiscal year 2013 and 2014 earnings to grow at 23 per cent and 17 per cent year-on-year to RM45.7 million and RM53.5 million, respectively, on the back of strong unbilled sales of RM710 million, and with new sales target of RM650 million to RM700 million.

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Source: Business Times (Malaysia)

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