PETALING JAYA: LBS Bina Group Bhd
, which has a strong positioning in affordable housing, enjoys double-digit profit margins led by cost-control and operational efficiency.
In a note where it initiated coverage on the property developer, Mercury Securities said the company’s profitability remains robust, with profit before tax margins of 13% to 14% in the financial years of 2022 and 2024 (FY22 to FY24).
“Earnings are projected to grow at a compound annual growth rate of about 10% over FY25 to FY27, reaching RM132.3mil by FY26, driven by steady project launches and its resilient affordable housing segment.”
Mercury Securities has a “buy” rating on LBS, with a target price of 64 sen, representing a 75% discount to an estimated revalued net asset value of RM2.54 per share.
The research house said the steep discount reflected prevailing macroeconomic uncertainties and the challenging outlook for the property sector in the near term.
“LBS’s valuation remains undemanding relative to its peers, our target price implies a FY25to FY26 forward price-to-earnings ratio range of 5.25 times to six times and price-to-book value ratio of 0.3 times, well below the broader property sector average of 11.3 times to 12.5 times and selected peers at 16 times to 21.4 times.
“This attractive entry point is further supported by dividend yields of 5% to 6%, enhancing total return potential.”
According to the research house, LBS offers a compelling risk-reward profile, underpinned by healthy unbilled sales pipeline and strong launch momentum, leadership in affordable housing, and sound financial management supporting sustainable growth.
It also pointed that the company’s unbilled sales moderation nearing trough, and that recovery is expected with upcoming launches and sustained demand.
As at July 31, 2025, its unbilled sales stood at RM1.38bil, providing a healthy revenue cover of 1.1 times FY25 forecast property development segment revenue.
While the level remained supportive of near-term earnings visibility, this represented a moderation from the peak recorded in FY22.
The earlier peak was largely attributable to the accumulation of backlog orders and the disruption of construction progress during the Covid-19 lockdowns, which led to a temporary build-up of unbilled sales.
As construction activities normalised, postpandemic and backlogs were gradually cleared, unbilled sales retraced sharply in FY23 and FY24 to a moderated level, reflecting both delivery of earlier projects and a slower pace of new sales recognition amid gradual take-up rates for ongoing projects.
“We view the current level of unbilled sales as representing a cyclical trough rather than a structural weakness.
“Importantly, LBS is set to launch RM2.3bil worth of new projects in FY25, with a strong focus on the affordable housing and township segments that have consistently demonstrated resilient demand.
“Given the commendable take-up rates achieved in its flagship projects such as KITA@Cybersouth and LBS Alam Perdana, we believe these upcoming launches will help replenish the unbilled sales pipeline meaningfully.
“Together with the anticipation of recovery in its property sales, we expect unbilled sales to recover gradually from FY25 onwards and potentially exceed 1.5 times revenue cover by FY26–FY27,” it said.
