LBS backed by solid earnings visibility

PETALING JAYA: LBS Bina Group Bhd’s business outlook remains good with total unbilled sales at an historic high of RM2.5bil, backed by RM2bil worth of launches planned for financial year 2023 (FY23).

Year-to-date, the property developer has already sold RM1.09bil worth of properties till mid-August with RM366mil worth of booking in the pipeline set to be converted soon.

“Unbilled sales stood at RM2.5bil as at end-July, ensuring earnings visibility for the next few years. LBS is also expected to complete and hand over eight projects to new homeowners in the second half of 2023 (2H23), which should boost its profitability and cash position,” RHB Research stated in a recent report on the company.

The research firm added LBS has launched RM1.4bil worth of projects and RM641mil worth of real estate developments are expected to be launched by the end of 2023.

This should see it edge closer to its RM2bil sales target for FY23 with LBS enjoying a take-up rate of 74% for its affordable housing for its ongoing projects.

The strong sales in the Klang Valley, Johor, Pahang and Perak saw LBS posting second-quarter earnings of RM33mil which took its 1H23 earnings to RM63.5mil, in line with RHB Research and market expectations at 52%-50% of full-year estimates, respectively.

Although its 1H23 revenue declined by 7.2% year-on-year (y-o-y) to RM760mil as the property development segment recorded lower revenue, LBS managed to offset that with better margins from its construction segment due to cost savings from completed construction contracts and cost optimisation.

As a result, the earnings before interest and tax margin in 1H23 improved to 18.8% from 16.1% in 1H22, RHB Research pointed out.

LBS’ motor racing and hotel businesses put in a mixed performance with 1H23 revenue from the motor racing circuit business rising by 29% y-o-y to RM8.6mil, driven by higher rental and corporate day events income. The hotel segment’s revenue dropped to RM3.2mil in 1H23 from RM4.4mil in 1H22 due to lower occupancy rates.

With its financial performance set to meet expectations, RHB Research has maintained a “buy” call on LBS with a target price of 56 sen a share, noting the stock offered a 4% FY23 yield to back.

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