Company Result 31 May 2018 LBS Bina Group Berhad

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1 MALAYSIA INVESTMENT RESEARCH REPORT JF APEX SECURITIES BERHAD (47680-X) Company Result 31 May 2018 LBS Bina Group Berhad A modest start BUY Maintained Share Price Target Price RM0.89 RM1.30 Company Description LBS Bina Group Berhad is a management and investment holding company. The company, through its subsidiaries, operates property development and investment. Stock Data Bursa / Bloomberg code 5789 / LBS MK Board / Sector Main / Property Syariah Compliant status Yes Issued shares (m) Par Value (RM) 1.00 Market cap. (RMm) week price Range RM Beta (against KLCI) m Average Daily Volume 0.69m 3-m Average Daily Value^ RM0.65m Share Performance 1m 3m 12m Absolute (%) Relative (%-pts) Major Shareholders % Gaterich Sdn Bhd Kumpulan Wang Persaraan CIMB Group Holding Sdn Bhd 3.55 Historical Chart May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 Source: Bloomberg Lee Chung Cheng , ext. 758 cclee@jfapex.com.my Result Comment Earnings below expectations. LBS Bina Group (LBS) recorded 1Q18 net earnings of RM23.0m, down 7.3% yoy and 5.3% qoq. 1Q18 net profit accounts for 18.7% and 18.0% of our full year earnings estimate and consensus respectively. The weaker-than-expected results were mainly due to lower progress billings. Lower yoy and qoq. The weaker yoy and qoq performance in 1Q18 were mainly due to lower work-in-progress (revenue down 3.0% yoy and 41.0% qoq) as certain projects were completed and handover to buyers in end of 2017 coupled with shorter working days in view of CNY festive season. Furthermore, the higher minority interests during the quarter also weighed on its bottom line as we believe its motor racing circuit in Zhuhai, China posted a better performance. New sales on track. The Group successfully chalked up RM703m of new sales from Jan till May 2018, which constitutes 39% of its new sales target of RM1.8b for this year. New sales were mainly driven by its Bukit Jalil and Aman Perdana projects in Klang Valley. We are impressed with the sales figure as it is 72.3% higher than a year ago (Jan-May 2017 with new sales of RM408m) amid prevailing subdued property market. Healthy unbilled sales. Meanwhile, LBS recorded RM1.7b of unbilled sales as of 1Q18, which is equivalent to 1.2x of its 2017 topline. Hence, it shall provide clearer signs of earnings visibility of more than a year to the Group. Not resting on its laurels on new launches. For 2018, the Group plans to launch 6 new and on-going projects with total GDV worth RM2.0b. These include Bukit Jalil project (RM807m GDV), Alam Perdana (RM650m), CyberSouth (RM211m), SkyLake Residence (RM190m), Bandar Saujana Putra (RM111m) and Bandar Putera Indah (RM53m). Cancellation of Heads of Agreement (HOA) with NWP Holdings Berhad (NWP). In a separate announcement, LBS said that it had terminated its HOA with NWP to jointly develop its 60% interests in 264-acres Zhuhai International Circuit (ZIC) land in China. While the Group did not specify any reason for the termination, we think that LBS would explore other viable options for its development of ZIC project in China. Please read carefully the important disclosures at end of this publication

2 Earnings Outlook/Revision We tweak down our earnings forecasts for 2018F and 2019F by respective 11% to RM109.7m (+6.1% yoy) and RM131.0m (+19.4% yoy) to account for the lower progress billings. Valuation & Recommendation Maintain BUY on LBS with an unchanged target price of RM1.30, which is based on 20% discount to its RNAV/share of RM1.63. We favour LBS for its: a) strong earnings visibility with the Group s sound business strategy of concentrating in selling affordable landed housings for this year especially in Klang Valley; and b) unlocking potential landbank values in ZIC with current advocate of One belt, One Road initiative amid stronger Malaysia-China ties. Figure 1: Quarterly Figures Year to 31 Dec (RMm) 1Q18 4Q17 1Q17 qoq (%) yoy (%) Turnover Operating profit Pre-tax profit Net profit Core net profit Operating margin (%) / ppt PBT margin (%) / ppt Figure 2: Financial Summary Year to 31 Dec (RMm) F 2019F Revenue Operating profit Profit before tax Net Profit Core net profit EPS (sen) DPS (sen) P/E (x) P/BV (x) Revenue growth (%) Core net profit growth (%) Operating margin (%) PBT margin (%) Dividend yield (%) Net gearing (%) ROE (%) ROA (%)

3 Figure 3: RNAV Local Projects Location Remaining Landbank Stake GDV (Current & Future Projects) DCF Basis Acre % RMm RMm Bandar Saujana Putra Selangor % 4, Discount rate of 9% D'Island Residence Puchong % 1, Desiran Bayu Puchong % Embun Mas Selangor % Taman Greenhill Shah Alam % Bukit Cherakah Selangor % Telok Gong Selangor % Tmn Tasek Puchong Puchong % Cameron The Centrum Cameron % 2, Tengkolok Cameron % Cameron Golden Hills Cameron % Taman Royal Lily Cameron 7 100% Kpg Raja Cameron 30 61% Bdr Putera Indah Batu Pahat % 1, Chemor, Ipoh Perak % Kampar Perak % Sinaran Mahkota Kuantan % Kuantan Kuantan % Midhills, Gohtong Jaya Pahang % Midhills 2, Gohtong Jaya Pahang % Johor CBD Johor % 2, Kulai Johor % 2, Danga Bay Johor % 1, Tampoi (JDA) Johor % 1, Celebrity Residence, KK Sabah % Bukit Jalil, KL KL % 1, Dengkil Selangor % 2, Ijok Selangor % 1, Kota Tinggi Johor % 2, Seri Kembangan Selangor 8 100% Unbilled sales 1, ,201.3 Stake in MGB 54.00% Based on w eighted average MGB share price of RM1.33 for the past 1 year China Assets Stake in Zhuhai Holdings 9.70% 80.3 Based on w eighted average Zhuhai share price of HKD1.16 for the past 1 year ZIC race track % Market price of RM59psf (nearby development land sold to Zhuhai Holdings at HKD118psf) Total 3,043.3 Net Debt as of 2Q17 (425.0) RNAV 2,618.3 Warrant A proceeds 4.3 Warrant B proceeds 56.1 RCPS RNAV post warrant proceeds & RCPS 2, Enlarged share cap. 1,711.3 Fully-diluted RNAV/share

4 Figure 4: Projects Launched in 1H2018 Source: Company Figure 5: Upcoming Launches in 2H2018 Source: Company 4

5 JF APEX SECURITIES BERHAD CONTACT LIST JF APEX SECURITIES BHD 6 th Floor, Menara Apex Off Jalan Semenyih Bukit Mewah Kajang Selangor Darul Ehsan Malaysia General Line: (603) Facsimile: (603) PJ Office: 15 th Floor, Menara Choy Fook On No. 1B, Jalan Yong Shook Lin Petaling Jaya Selangor Darul Ehsan Malaysia General Line: (603) Facsimile: (603) DEALING TEAM Kong Ming Ming (ext 3237) Shirley Chang (ext 3211) Norisam Bojo (ext 3233) Institutional Dealing Team: Zairul Azman (ext 746) Fathul Rahman Buyong (ext 741) Muhammad Syukri (ext 744) Ahmad Mansor (ext 744) Nur Nadia (ext 741) PJ Office: Mervyn Wong (ext 363) Azfar Bin Abdul Aziz (Ext 822) Tan Heng Cheong (Ext 111) RESEARCH TEAM Lee Chung Cheng (ext 758) Lee Cherng Wee (ext 759) Low Zy Jing (ext 754) Nursuhaiza Binti Hashim (ext 752) Siau Li Shen (ext 753) JF APEX SECURITIES - RESEARCH RECOMMENDATION FRAMEWORK STOCK RECOMMENDATIONS BUY : The stock s total returns* are expected to exceed 10% within the next 12 months. HOLD : The stock s total returns* are expected to be within +10% to 10% within the next 12 months. SELL : The stock s total returns* are expected to be below -10% within the next 12 months. TRADING BUY : The stock s total returns* are expected to exceed 10% within the next 3 months. TRADING SELL : The stock s total returns* are expected to be below -10% within the next 3 months. SECTOR RECOMMENDATIONS OVERWEIGHT : The industry as defined by the analyst is expected to exceed 10% within the next 12 months. MARKETWEIGHT : The industry as defined by the analyst is expected to be within +10% to 10% within the next 12 months. UNDERWEIGHT : The industry as defined by the analyst, is expected to be below -10% within the next 12 months. *capital gain + dividend yield JF APEX SECURITIES BERHAD DISCLAIMER Disclaimer: The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of JF Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report. Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of JF Apex Securities Berhad and are subject to change without notice. JF Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. JF Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against JF Apex Securities Berhad. JF Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of JF Apex Securities Berhad. Published & Printed By: JF Apex Securities Berhad (47680-X) (A Participating Organisation of Bursa Malaysia Securities Berhad) 5