• Maintain BUY, new MYR0.56 TP from MYR0.64, 38% upside and c.2% yield. 9M22 results beat expectations on faster-than-expected progress billings for key development projects. LBS Bina has exceeded its MYR1.6bn FY22 sales target, with total sales of MYR1.8bn as of mid- November, demonstrating the continued strong demand for affordable homes despite macroeconomic challenges. Nevertheless, we increase our RNAV discount to 65% to account for the uncertain political environment, economic outlook, and market sentiment.

• Above expectations. 3Q22 earnings of MYR35.4m (+0.6% QoQ, +95% YoY) brought 9M22 earnings to MYR100.6m (+69% YoY). Results were above expectations, at 85% of our and consensus’ full-year estimates. 9M22 revenue rose 46% YoY on higher contribution from its key development projects, with Klang Valley projects remaining the largest contributor at 85% of total revenue. However, 9M22 EBIT margin was slightly compressed at 15.5% vs 9M21’s 16.5% due to higher building material costs.

• Beating its sales target. LBS exceeded its initial sales target of MYR1.6bn for FY22 with MYR1.8bn total sales as of mid-November (FY21: MYR1.58bn). Most of the new sales were contributed by projects at LBS Alam Perdana, KITA @ Cybersouth, and Idaman BSP. Take-up rates for ongoing projects are healthy, averaging at 82%, and pipeline bookings of MYR288m should lead to a strong end to the year. Unbilled sales are stable at MYR2.54bn as of October (Sep 2022: MYR2.5bn, Sep 2021: MYR2.1bn), providing revenue visibility for the coming years.

• Project launches on schedule. LBS has picked up the pace of its property launches during the quarter, launching MYR1.2bn GDV as of mid-November from just MYR305m by mid-August. It plans to launch a total MYR1.78bn GDV for FY22, with MYR424m worth of launches expected in 4Q22, including the 26-unit Emerald Garden in Batu Pahat and Idaman Melur. While the rising interest rate and inflationary environment are downside risks, we think the full stamp duty exemption for homes below MYR500k should help mitigate this risk next year.

• Still BUY. In view of the better-than-expected results, we raise FY22F- 24F earnings by 6-13%, but lower our TP on a higher RNAV discount of 65% from 60% due to the uncertain political environment. While the rising interest rates and inflationary environment are downside risks, 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 in line with the country median.

Source: RHB Research - 22 Nov 2022