PublicInvest Research retains Outperform for LBS Bina

Artist impression of LBS Bina's Skylake Residence serviced apartments.

KUALA LUMPUR: Public Investment Bank Research (PIVB) continues to like LBS Bina’s growth prospects and reiterates its Outperform call with an unchanged target price of RM2.23.

It said on Thursday the target price was at a 30% discount to the fully diluted realised net asset value (RNAV). 

LBS is buying 7.98 acres of leasehold land in the Seri Kembangan area for a total consideration of RM63mil and plans to build four towers of 1,323 serviced apartments with an estimated gross development value (GDV) of about RM600mil. 

Averaging RM450,000 per unit, the  development is very much in line with its primary focus in the mid-market segment. 

“We anticipate healthy take-ups given the attractiveness of the said location with its good accessibility and many amenities already in place. The proposed development is expected to commence in 2018,” it said.  

PIVB Research said with an estimated 10% net margin, the project should enhance earnings by c.3%-5% per annum over the eight-year period of the development.

“We leave earnings estimates unchanged for now however as meaningful contributions are only likely to kick-in 2020 onwards,” it said. 

Commenting on the location, PIVB Research said the site is in the existing Taman Lestari Perdana township. It is 4km from the Seri Kembangan town centre and 6km from Pusat Bandar Puchong and accessible via major highways like the Maju Expresssway (MEX) and South Klang Valley Expressway (SKVE). 

The proposed Serdang-Kinrara-Putrajaya Expressway (SKIP), Kinrara-Damansara Expressway (KIDEX) and new Seri Kembangan interchange at the MEX highway will boost accessibility. 

PIVB Research said the plot of land has 95 years (of 99) remaining on its lease, expiring on Sept 2, 2112. 

“While the RM181.31 per square foot paid is seemingly priced at the upper-end of comparable market values in the vicinity, it is very much within the range of acceptable land cost (at c. 10.5%) based on the preliminary GDV.    

“Payment terms are attractive, with the group only having to fork out RM34.5m in cash. The remaining RM28.5mil will be settled by way of contra through properties developed. The deal is contingent upon the vendor acquiring the relevant authorities’ approval to transfer the land to LBS,” it said.