KUALA LUMPUR (Aug 22): RHB Research maintained its call and target price (TP) for LBS Bina Group Bhd after its earnings for the second financial quarter ended June 30, 2023 (2QFY2023) met the research firm's expectations, despite chalking a year-on-year (y-o-y) decline.
In a research note on Tuesday (Aug 22), RHB reaffirmed its “buy” call and unchanged TP of 56 sen for the property developer, with a 4% upside and an about 4% yield forecast for FY2023, based on a 65% discount to revalued net asset value.
LBS Bina’s net profit fell 6.02% to RM33.01 million for 2QFY2023, from RM35.13 million a year earlier, due to lower contributions from its property development segment, while quarterly revenue declined by 8.52% to RM375.39 million from RM410.37 million for 2QFY2022.
The research house noted that the developer’s earnings were in line with expectations at 52% its full-year estimate and 50% of the street’s, and remained positive on the outlook for LBS Bina.
However, it said that y-o-y, LBS Bina saw its revenue decline by 7.2% for the first half ended June 30, 2023 (1HFY2023), as its property development segment's revenue decreased by 7% due to certain projects being near completion before vacant possession.
“We note that this was partially offset by better margins for the construction segment, due to cost savings from completed construction contracts and cost optimisation.
“As a result, the Ebit (earnings before interest and taxes) margin improved to 18.8% in 1HFY2023, from 16.1% in 1HFY2022,” said RHB.
RHB added that LBS Bina is set to meet its RM2 billion property sales goal. As at Aug 14, it had recorded RM1.09 billion in property sales, and RM366 million in bookings were in the pipeline poised for conversion.
“As such, we think LBS Bina is on track to meet its RM2 billion property sales target for FY2023 — 88% of the sales are for property units in the Klang Valley, followed by 6% in Johor, 4% in Pahang, and 2% in Perak.”
The research house added that the developer's unbilled sales stood at RM2.5 billion as at end-July, ensuring earnings visibility for the next few years.
“LBS Bina is also expected to complete and hand over eight projects to new homeowners in 2HFY2023, which should boost its profitability and cash position.”
The developer is also projected to achieve RM2 billion in project launches, and year-to-date, it has launched RM1.4 billion worth of projects, while RM641 million worth of real estate developments are expected to be launched by end-FY2023.
“The biggest contribution will come from launches of its projects in Bayu Hills in Genting, Bandar Saujana Putra in Selangor, and Taman Molek in Johor.
“For its ongoing projects, the take-up rate has been strong at 74%, which is a testament to the strong demand for its affordable housing units.”
In the morning session on Tuesday, LBS Bina shares fell by one sen or 1.85% to 53 sen each, giving the company a market capitalisation of RM816.41 million.