LBS Bina’s new project in Seri Kembangan a positive

PETALING JAYA: PublicInvest Research has maintained its "outperform" call on LBS Bina Group Bhd with an unchanged target price of RM2.23 based on a positive outlook of the group's new project in Seri Kembangan.

This is a more than 13% upside to its closing price of RM1.97.

"Priced at affordable ranges targeting first-time homebuyers, working professionals and young families, this is very much in line with its primary focus in the mid-market segment. With an estimated 10% net margin, the project should enhance earnings by about 3-5% per annum over the eight-year period of the development," it said in a report.

On Wednesday, the group announced the acquisition of a 7.98-acre plot of leasehold land in Seri Kembangan for RM63 million, with preliminary plans to develop four towers of serviced apartments with an estimated gross development value (GDV) of RM600 million.

"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 about 10.5%) based on the preliminary GDV," said PublicInvest Research.

It said that the payment terms are attractive, with the group only having to fork out RM34.5 million in cash while the remaining RM28.5 million 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 Bina.

The developer is proposing to develop a total of 1,323 units of serviced apartments within four towers. At an average price of about RM450,000 per unit, PublicInvest Research reckons that the development is very much in line with the group's 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.

It maintained its earnings estimates, as meaningful contributions from the development would likely kick-in from 2020 onwards. Its net profit estimates for FY17 and FY18 are RM109.8 million and RM146.7 million respectively while revenue estimates for the same period are RM1.14 billion and RM1.48 billion respectively.

The property developer has close to 4,000 acres of land in Selangor, Johor, Pahang and Perak. It also has 264 acres of land in Zhuhai, China, which houses the Zhuhai International Circuit.