LBS Bina back on investors’ radar screen

WHILE the local property sector continues to be gloomy, LBS Bina Group Bhd’s shares are climbing steadily. They closed at a near two-year high of RM1.59 last Friday.

Talking to the company’s managing director Tan Sri Lim Hock San, one might be forgiven for thinking the property market is actually doing well, for he is targeting another record-breaking year for the group with sales of RM1.2 billion. This is thanks to new launches in the pipeline with a combined gross development value of more than RM1.9 billion (see table).

“If market conditions were good, our property sales would be even higher, at RM1.5 billion or RM1.8 billion, but we don’t want to over-promise,” Lim tells The Edge.

The 850-acre Bandar Saujana Putra (BSP) and 175-acre D’Island Residence, which accounted for 80% of LBS’ sales last year, are expected to remain the anchor contributors, contributing 75% to sales this year.

Moving forward, LBS is planning a major development on a 34.7-acre parcel — its last — in BSP. Comprising apartments, offices, a hotel and a shopping mall, the project’s GDV is estimated at RM2 billion to RM3 billion.

“We saved the best for last,” smiles Lim. “Hopefully, the plan will become clearer in the next few months. For us, this is a big challenge and I will personally monitor the project.”

In its financial year ended Dec 31, 2015 (FY2015), LBS’ net profit grew 8.7% year on year to RM76 million or 14.08 per share while revenue rose 1.8% to RM680 million.

In FY2016, management expects net profit to climb to RM80 million to RM85 million on higher revenue of RM750 million to RM800 million. The group’s financial performance will be backed by its strong unbilled sales, which stood at RM1.1 billion as of end-February, mainly from its 16 ongoing projects.

It is worth noting that LBS has a 60% stake in Zhuhai International Circuit, which owns a racing circuit on 264 acres in Zhuhai, China.

Last month, LBS finally kick-started its long-awaited ZIC upgrading and transformation plan by launching the Melaka Cultural and Trade Centre there, consisting of a cultural museum, a one-stop tourism centre and an exhibition hall.

Next, the group will build two more functional areas there, namely the Motor Sports and Services Amenities Zone and the Tourism Zone, which will feature a motorsport-themed hotel, a world-class theme park and a factory outlet for premium brands.

Lim says the racing circuit will be closed for a year, paving the way for the mega-project to be completed within two years. He declines, however, to estimate the GDV as the plan has yet to be finalised.

He adds: “We have received many joint-venture offers as the racing circuit is expected to attract two million to four million people a year.

“As a group, LBS cannot just depend on property development. We need to have some recurring income, which is why we will be adopting a profit-sharing model on the premium outlet and theme park.”

Apart from its landbank in China, LBS owns more than 2,800 acres across Malaysia, which have an estimated GDV of RM22 billion. About 48% of the land is located in Johor, a quarter in the Klang Valley, 9% in Pahang and the remaining 18% in Perak and Sabah.

LBS, which morphed into a property developer with a focus on townships and medium-cost mass housing, achieved record-high property sales of RM1.029 billion last year.

CIMB Research initiated coverage of the property company in early March — before Kumpulan Wang Persaraan emerged as a substantial shareholder in the company with 5.5% equity interest at the end of the month.

Lim, 58, says the investing public has started to recognise LBS again as a growth stock and dividend play among the property counters. “KWAP has been following us for many years. It was very difficult to get them to come in but we somehow managed to convince them. For us, this is an endorsement because their action speaks louder than words.”

Lim, who is the eldest son of LBS’ founding chairman, Datuk Seri Lim Bock Seng, took the helm of the company in December 2001. The family’s private vehicle — Gaterich Sdn Bhd — controls 55.57% of the company.

With KWAP’s entry, Lim is hoping LBS will see stronger interest from foreign institutional funds, especially those from China and Hong Kong. He, however, acknowledges that it may take some time.

“Today, we are one of the largest property companies in Malaysia among those with a market capitalisation of below RM1 billion but some fund managers are still reluctant to buy our shares,” he remarks.

“It’s not for us to judge whether we are a first-tier or second-tier developer. But I believe that once we have hit the RM1 billion mark, we should be able to attract more institutional investors.”

A quick check on Bloomberg shows that the likes of Koperasi Permodalan Felda Malaysia Bhd, Pacific Mutual Fund Bhd and AIA Bhd are listed as LBS’ shareholders. Institutional investors currently hold about 20% of the company, of which less than 5% is owned by foreign funds.

In a March 2 report, CIMB Research analyst Saw Xiao Jun says LBS has been off the radar screen of most fund managers due its relatively small size but that it is only a matter of time before it starts to attract institutional investors. “It is poised to become one of the few developers capable of delivering strong sales in the current market.”

The stock has risen 13.5% since CIMB Research initiated coverage on March 2, giving the company a market capitalisation of RM877.1 million as at last Friday. The research house has a target price of RM1.85 for the stock.

According to Lim, it is LBS’ immediate target to achieve a market capitalisation of RM1 billion. “After that, we can think of RM1.2 billion or RM1.5 billion. We want to enhance shareholders’ value and for people to enjoy investing in our company.”

He opines that LBS can be considered a high-growth stock with potential catalysts and which provides a decent dividend yield of around 7%.

Based on its closing price of RM1.59 last Friday, LBS is trading at a rolling 12-month price-earnings ratio of 11 times and a price-book-value ratio of 0.8 times.

Do not ask the taxi driver about the value of your home. Click here at The Edge Reference Price to find out.

This article first appeared in The Edge Malaysia on April 4, 2016. Subscribe here for your personal copy.