LBS: Property Developer Positioned for Growth with Robust Pipeline and Cost Discipline

TA SECURITIES has initiated coverage on a prominent property developer with a BUY recommendation and a target price of RM0.64. The firm highlights the developer’s strong fundamentals, attractive valuation, and long-term earnings visibility, driven by a strategic focus on affordable housing and disciplined operational execution. Despite a moderation in recent financial performance, the company is well-positioned to capitalize on a recovering property market.

Performance Review and Operational Strengths

For the first half of FY2025, the developer reported a revenue of RM639 million and a PATMI of RM62 million, reflecting a year-on-year decline primarily due to the completion of several FY2024 projects and a slower pace of progress billings from new launches. However, profitability margins remained stable, with a PBT margin of 15.5% and 9.7% respectively. This resilience is attributed to disciplined cost management and operational efficiencies, particularly through the use of Industrialized Building System (IBS) technology by its subsidiary. The company has also significantly strengthened its balance sheet, with net gearing improving to 0.29x in FY2024 from 0.51x in FY20, projected to further decline to 0.04x by FY2026. Unbilled sales stood at RM1.38 billion as of July 2025, representing a healthy 1.1x revenue cover against the FY2025 forecast. The group maintains a remarkably low unsold inventory, indicating effective sales execution.

Strategic Pipeline and Future Outlook

The developer boasts a robust launch pipeline, with plans to introduce RM2.3 billion worth of new projects in FY2025. This is expected to replenish its unbilled sales pipeline, extending beyond a 1.5x revenue cover by FY2026-27. The company commands an extensive landbank with a total gross development value (GDV) of RM34 billion. A significant portion (58%) of this landbank is strategically located in high-growth areas, such as the Klang Valley and Johor, providing 10 to 15 years of earnings visibility. The recently introduced “8 x 8 Strategy” for 2025-2027 targets RM8.0 billion in new launches, emphasizing township expansions and affordable housing, along with diversification into areas like landbank optimization, including a 43MWp solar farm for recurring income. Initiatives like the Kwasa Damansara Development Rights Agreement (GDV > RM8bn) are poised to be immediate value drivers.

Challenges and Investment Rationale

While the property sector faces macroeconomic uncertainties and a challenging near-term outlook, the developer’s valuation remains attractive relative to its peers. The current share price implies a FY25-26E forward P/E range of 5.25x-6.0x and a P/B of 0.3x, both significantly below the broader sector averages. Key risks identified include subdued property sales, construction cost fluctuations, and potential delays in project launches and completion. Nevertheless, the investment bank views the company as well-positioned to benefit from market stabilization and improved investor sentiment, particularly given its leadership in the affordable housing segment and sound financial management. The attractive dividend yields of 5-6% further enhance the total return potential for investors.