Company Result 28 November 2017 LBS Bina Group Berhad

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1 MALAYSIA INVESTMENT RESEARCH REPORT JF APEX SECURITIES BERHAD (47680-X) Company Result 28 November 2017 LBS Bina Group Berhad Stellar 9M performance BUY Maintained Share Price Target Price RM2.18 RM2.50 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 1.11m 3-m Average Daily Value^ RM2.15m Share Performance 1m 3m 12m Absolute (%) Relative (%-pts) Major Shareholders % Gaterich Sdn Bhd Kumpulan Wang Persaraan Historical Chart Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Source: Bloomberg Lee Chung Cheng , ext. 758 cclee@jfapex.com.my Result Comment Earnings meet expectations. LBS Bina Group (LBS) recorded a 3Q17 net profit of RM25.9m, up 26.3% yoy but down 8.8% qoq. Overall, the Group posted 9M17 net profit of RM79.1m, up 37.3% yoy and is in line with our and market estimates, meeting 75% and 73% of full year net earnings forecasts respectively. Stellar yoy results. The stronger yoy performance in 3Q17 and 9M17 bottom line was attributable to better top line (3Q17: +43.5%; 9M17: +42.3%) as underpinned by its existing projects namely Bandar Saujana Putra, D Island Residence, Bandar Putera Indah, Sinaran Mahkota, Midhills, Desiran Bayu and Zenopy Residences. However, LBS posted slightly weaker qoq results mainly due to completion of certain projects coupled with lower margin achieved. New sales inching closer to target. LBS chalked up RM1.3b new sales as of end-nov 17 (+18% yoy against RM1.1b as of end Nov 16), which accounts for 89% of the management s full year new sales target of RM1.5b. New sales achieved from Jan till Nov 17 were mainly contributed by Bandar Saujana Putra (23% of total sales) and recentlylaunched Alam Perdana (20%) in the Klang Valley, as well as Midhills in Genting Highlands (16%). Meanwhile, the Group s unbilled sales are still resilient, increasing further to RM1.6b as of Oct 17 or equivalent to 1.6x of its 2016 topline. Launch of Alam Perdana and Bukit Jalil projects during 4Q17 to boost sales further. The Group plans to replicate the success of its flagship township, Bandar Saujana Putra in Alam Perdana. LBS is mainly focusing on affordable homes under this project. Located in Ijok, Alam Perdana is a 470-acre leasehold township development that will be developed over eight phases. It has a GDV of RM2.9 billion. The township s first two developments, Simfoni Perdana and Irama Perdana, have gained positive response from home buyers. Under Simfoni Perdana, LBS has launched 168 units of 2-storey townhouses worth GDV of RM65m (gross built-up area from 1,191sf) with competitive pricing of RM369k/unit. Meanwhile, for Irama Perdana, the Group has launched 349 units of 2-storey houses (GDV of RM170m) and is about to launch another 324 units (GDV of RM161m) to cope with the strong demand. Average built-up area for Irama Perdana is 1,208sf with affordable pricing of RM480k/unit. Besides, LBS targets to launch a block of serviced apartment named Residensi Bintang in Bukit Jalil project which consists of 730 units worth GDV of RM500m. Built-up areas range from 803sf to 1006sf with RM545k to Please read carefully the important disclosures at end of this publication

2 RM650k/unit. Earnings Outlook/Revision No change to our net earnings forecasts for F (2017F: +22.5% yoy; 2018F: +17.0% yoy). We keep our new sales assumptions of RM1.5b for this year and next year. Valuation & Recommendation Maintain BUY on LBS with a higher target price of RM2.50 (previously RM2.27) based on 30% discount (from 35%) to its RNAV/share of RM3.57 (upward revision from RM3.49 after factoring in the project in Seri Kembangan with potential GDV of RM600m, higher valuation in its 51% stake in ML Global following rising share price, and the impact of RCPS). We lower our discount to RNAV/share in order to better reflect the recent positive newsflow such as proposed share split and bonus issue, approval on additional land usage for its Zhuhai International Circuit (ZIC) which may expedite the land sale and hence prompting declaration of special dividend for 2018F onwards, as well as anticipated overwhelming response for its newly launched major township project, Alam Perdana. Figure 1: Quarterly Figures Year to 31 Dec (RMm) 3Q17 2Q17 3Q16 qoq (%) yoy (%) 9M17 9M16 yoy (%) Turnover Operating profit Pre-tax profit Net profit Core net profit Operating margin (%) / ppt PBT margin (%) / ppt Source: Company, JF Apex 2

3 Figure 2: Remaining Landbank of 3,856 acres Mainly Concentrated in Klang Valley & Johor Source: Company Figure 3: Projects Launched in 2017 Source: Company 3

4 Figure 4: Financial Summary Year to 31 Dec (RMm) F 2018F 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 (%) Source: Company, JF Apex 4

5 Figure 4: 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 ML Global 51.00% Based on w eighted average ML Global share price of RM1.13 for the past 1 year China Assets Stake in Zhuhai Holdings 9.70% 85.8 Based on w eighted average Zhuhai share price of HKD1.17 for the past 1 year ZIC race track % Market price of RM62psf (nearby development land sold to Zhuhai Holdings at HKD118psf) Total 2,943.2 Net Debt as of 2Q17 (425.0) RNAV 2,518.2 Warrant A proceeds 46.6 Exercise price of RM1 Warrant B proceeds Exercise price of RM1.25 RCPS Implied conversion price of RM2.20 RNAV post warrant proceeds & RCPS 2, Enlarged share cap Fully-diluted RNAV/share 3.57 Source: Company, JF Apex 5

6 JF APEX SECURITIES BERHAD CONTACT LIST JF APEX SECURITIES BHD Head Office: 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 Head Office: Kong Ming Ming (ext 3237) Shirley Chang (ext 3211) Norisam Bojo (ext 3233) Institutional Dealing Team: Fathul Rahman Buyong (ext 741) Muhammad Syukri (ext 744) Ahmad Mansor (ext 744) Zairul Azman (ext 746) Nur Nadia (ext 741) PJ Office: Mervyn Wong (ext 363) Azfar Bin Abdul Aziz (Ext 822) Tan Heng Cheong (Ext 111) RESEARCH TEAM Head Office: 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) 6