KUALA LUMPUR (April 9): CGS-CIMB Research has downgraded LBS Bina Group Bhd at 56 sen with a higher target price (TP) of 59 sen (from 49 sen) pegged at a higher FY22F P/BV of 0.6x (3-year mean P/BV) vs. 0.5x previously (-1 s.d. from its 3-year mean P/BV), given the potential for stronger earnings from the reclamation and development agreement (RDA) and of Zhuhai International Circuit (ZIC).
In a note today, analyst Ngo Siew Teng said that the TP increase was due to the prospected value of the RDA and ZIC, but noted that the “hold” call was attributed to LBS’s current share price.
“We raise our TP to RM0.59, pegged to a higher FY22F P/BV of 0.6x (3-year mean P/BV) vs. 0.5x previously (1 s.d. From its 3-year mean P/BV), given the potential for stronger earnings from the RDA and ZIC monetisation.
“We downgrade LBS to Hold as its share price outperformed the FBM KLCI index by circa 12% years to date (YTD), indicating that the positive outlook (higher FY21-23F earnings and potential value from ZIC) is likely priced in.
“It is trading at 0.55x FY22F P/BV (on the higher end of its peers’ average of 0.5x),” Ngo reasoned.
LBS yesterday said its 70% indirectly-owned subsidiary Leaptec Engineering Sdn Bhd (LESB) will pay the state government RM95 million for the reclamation and development rights, of which will be funded by internally generated funds and bank borrowings.
The agreement signed by LESB for the reclamation and development of reclaimed land into an industry hub with port facilities is dependent on the fulfilment of various license and permit approvals within the next 18 months.
The 1,200-acres of reclaimed land is part of the 25,000-acre Melaka Waterfront Economic Zone (MWEZ) located at the coastline of Melaka.
LESB had reported that the reclamation works will be carried out within a period of five years following approval, and will take another 15 years to develop said land into the planned industry hub with port facilities.
“We gather that specialised works, such as land reclamation and port facilities, are likely to be outsourced or carried out via partnership, while the construction of commercial/industrial properties would be undertaken by its construction arm, MGB Bhd,” the analyst added.
Ngo highlighted the LBS’s potential bilateral investment opportunities with China-based partners due to the “Friendly State and Province” rapport between Melaka and the Guangdong province.
She noted that LESB will own 80% of the land while the state government will own the remaining 20% and gathered that 40% of the land area is dedicated to port-related businesses and 60% will be mixed development (commercial and industrial).
At 10:36am today, LBS had dipped 0.5 sen or 0.89% to RM0.56, valuing it at RM870.64 million.
