LBS Bina Group Bhd (July 27, RM1.97)
Reiterate outperform with an unchanged target price (TP) of RM2.23: LBS Bina Group Bhd announced the acquisition of a 7.98-acre (3.23ha) plot of leasehold land in the Seri Kembangan area for a total consideration of RM63 million, with preliminary plans to develop four towers of serviced apartments with an estimated gross development value (GDV) of about RM600 million.
Priced at affordable ranges targeting first-time homebuyers, working professionals and young families, this is very much in line with its primary focus on the mid-market segment.
With an estimated 10% net margin, the project should enhance earnings by around 3% to 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 from 2020 onwards.
We continue to like LBS Bina’s growth prospects nonetheless, and reiterate our “outperform” call with an unchanged TP of RM2.23 (30% discount to fully diluted revalued net asset valuation).
The land is located in the existing Taman Lestari Perdana township and it is strategically placed 4km from the Seri Kembangan town centre and 6km from Pusat Bandar Puchong and currently accessible via major highways like the Maju Expresssway (MEX) and South Klang Valley Expressway.
Measuring 7.98 acres, the plot of land has 95 years (of 99) remaining on its lease, expiring on Sept 4, 2112. While the RM181.31 per sq ft 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 around 10.5%) based on the preliminary GDV.
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.
Based on preliminary plans, LBS Bina is proposing to develop four towers of serviced apartments with a total of 1,323 units. Averaging about RM450,000 per unit, the development is very much in line with its primary focus in the mid-market segment.
We anticipate healthy take-up given the attractiveness of the said location with its good accessibility and many amenities already in place. — PublicInvest Research, July 27
This article first appeared in The Edge Financial Daily, on July 28, 2017.