- Maintain BUY and MYR0.64 TP, 52% upside and c.2% yield. 1H22 results exceeded expectations due to better-than-expected margins, with the strong performance underpinned by the continuous strong demand for its ongoing development projects. LBS Bina is on track to meet its sales target of MYR1.6bn, with total sales of MYR1.3bn as of mid-August. We are positive on its outlook given the historically strong take-up rate in the affordable housing segment, although we are wary of near-term headwinds coming from supply chain disruptions, high material costs, and labour shortages.
- Above expectations. 2Q22 earnings of MYR35.1m (+16% QoQ, >100% YoY) brought 1H22 earnings to MYR65.3m (+57% YoY). Results came in above expectations, at 60% and 70% of our and consensus full year estimates. On a QoQ basis, revenue and PBT were flat, with development projects within the Klang Valley remaining the largest revenue contributor, accounting for 84% of total revenue. For the construction and trading segment, revenue in the 1H22 (MYR304.2m) increased by 7% YoY thanks to increased contributions from in-house projects, but PBT for the segment (MYR13.8m) was 32% lower due to rising building material costs and labour shortages.
- On track to meet MYR1.6bn sales target. Property sales between Jan and Jun 2022 stood at MYR958m (MYR1.3bn to date) – on track to meet the group’s sales target of MYR1.6bn for FY22F. Given the 80% take-up rate for ongoing projects and pipeline bookings worth MYR351m, we believe LBS will have no issues in meeting its relatively flattish sales target (FY21 property sales: MYR1.58bn). As of Jun 2022, unbilled sales stood at MYR2.4bn (Mar 2022: MYR2.44bn, Jun 2021: MYR2.2bn).
- A busy 2H22 ahead. As of 15 Aug 2022, the group has launched MYR305m GDV worth of projects, and is planning to launch a further MYR1.47bn GDV for the remainder of the year. These include KITA @ Cybersouth (MYR856m GDV), Bayu Hills, Genting (MYR492m GDV) and Alam Perdana (MYR123m GDV). We think that the reintroduction of the stamp duty exemption under Keluarga Malaysia Home Ownership Initiative (i-Miliki) announced in July will be a boost to the group as it motivates first- time homebuyers.
- Maintain BUY. In view of the better-than-expected results, we raise our FY22F-24F earnings by 9%. While rising interest rates and inflationary environment are a downside risk, we believe LBS’ positioning as a leading player in the affordable housing segment should mitigate these risks. We apply a 0% ESG premium/discount to the TP as the group’s ESG score of 3.0 is line with the country median.
- Key risks include an extended soft property market, rising competition in the affordable housing segment, and steep interest rate hikes.
Source: RHB Research - 23 Aug 2022