LBS: Strategic Initiatives Drive Growth and Enhanced Shareholder Value

A recent investment bank research report highlights a robust outlook for a prominent property developer, driven by strategic transformation, enhanced shareholder returns, and strong earnings visibility. Following a post-12MFY25 briefing, analysts reiterated a BUY rating with an unchanged RNAV-based target price of RM0.64, suggesting significant upside from the last traded price of RM0.45, and an attractive dividend yield of 7%-8%.

Robust Performance and Strategic Vision

The company has embarked on an ambitious “8×8 Strategy,” a three-year corporate roadmap (2025-2027) aimed at scaling its property development business and diversifying its revenue base. This strategy outlines plans to launch projects worth an estimated RM8.0 billion, encompassing a diverse mix of residential, industrial, and commercial developments. Management is actively pursuing high-value developments and asset-light strategies, including the disposal of a 3.5-acre land parcel in Johor, which is expected to yield a profit in 3QFY26. Significant future projects include 2,922 residential units at Kwasa Damansara with an estimated Gross Development Value (GDV) exceeding RM8 billion, alongside a RM7 billion industrial mixed-use element via the Klebang JV, and a 43-MWp solar farm slated for grid connection by year-end.

Commitment to Shareholder Returns

In a move to enhance shareholder value, the company is transitioning to a period of higher shareholder returns. Management has increased the dividend payout ratio from 30% to 40% of core earnings, effective FY25. For the current financial year, a dividend of 3.30 sen per share has been proposed. This commitment is further underscored by capital management initiatives, including the cancellation of 10 million treasury shares, designed to boost EPS accretion, mitigate dilution risk, and reinforce intrinsic value.

Strong Earnings Visibility and Future Outlook

The developer continues to demonstrate robust sales momentum and high earnings visibility. It achieved RM1.42 billion in property sales for FY25, with YTD sales for 2026 reaching RM163 million, supported by a booking pipeline of RM252 million. Revenue visibility is firmly anchored by unbilled sales of RM1.29 billion as of January 2026. The group’s 19 ongoing projects, with a total GDV of RM4.3 billion, maintain a healthy average take-up rate of 79%, with top-performing projects such as Idaman and KITA @ Cybersouth reaching 95% and 87% take-up, respectively. Strict inventory discipline is maintained, with unsold completed stock representing a mere 1.5% of total units launched over the past four years.

The outlook remains highly positive, with robust sales of RM1.4 billion and resilient core earnings growth anticipated for CY2026. Earnings visibility is further supported by RM1.27 billion in unbilled sales and a substantial 3,970-acre landbank. The planned RM110 million land monetization in Johor is expected to result in a RM45 million gain in FY2026. Furthermore, FY26E earnings have been revised higher by 9% to RM144 million, attributed to improved profitability margins and lower funding costs.

Valuation and Investment Rationale

The target price of RM0.64 is derived from a 75% discount to the estimated revalued net asset value (RNAV) of RM2.54 per share. This implies a FY26E forward P/E range of 6.8x, which is significantly below the broader property sector average (11.3x-12.5x) and selected peer range (16.0x-21.4x). The report highlights these undemanding valuations and a prospective dividend yield of 7%-8% as key reasons to reiterate the BUY call. The compelling risk-reward profile is supported by a healthy unbilled sales pipeline, strong launches across all segments, leadership in affordable housing, and disciplined financial management under the 8×8 Strategy.

Key Risks to Consider

Potential risks identified include subdued property sales, fluctuations in construction costs, and delays in project launches and completion.