LBS Bina Group optimistic about securing decent sales in 2016

LBS Bina Group Bhd (April 4, RM1.63)

Initiate coverage with a target price (TP) of RM1.73: LBS Bina Group Bhd (LBS) raked in about RM1.03 billion in property sales for 2015. The group remains optimistic about securing decent sales in 2016, having set a sales target of RM1.2 billion, up 57% year-on-year.

Its focus this year remains on affordable properties, with 6% of its launches below RM500,000 per unit.

LBS targets a 30% dividend payout. The group also will continue with its special dividend payout of about six sen per share. Excluding that, we project a dividend yield of 4.4% to 7.8% for financial year 2016 forecast (FY16F) to FY18F. Besides its property development business, LBS also owns 60% of the Zhuhai International Circuit (ZIC) in China. LBS is seeking approvals to transform the land to include businesses in tourism, commercial and hospitality, while maintaining the racing circuit. Should it succeed, LBS would either develop the parcels together with a local partner or undertake an outright sale of the land. Both outcomes would be positive, but the latter should result in a potential special dividend being paid out.

Pegging the land at HK$118 (RM59.23) per sq ft (similar to its 2013 transaction), LBS’ 60% stake could be worth about RM425 million (49% of market capitalisation).

We initiate coverage with a “buy” and TP of RM1.73, based on a 50% discount to its fully diluted revised net asset value of RM3.47 per share, implying an FY17F price-earnings of 10.8 times. We like LBS for its attractive dividend yield of 4.4%  to 7.8%, and potential unlocking of the value of ZIC (currently at book value). Should LBS be able to monetise some of its ZIC land, its dividend yields could easily be lifted by an additional four sen to six sen. — UOB Kay Hian, April 4

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This article first appeared in The Edge Financial Daily, on April 5, 2016. Subscribe to The Edge Financial Daily here.