LBS: Steady Earnings Visibility Reinforces ‘BUY’ Rating

MERCURY SECURITIES SDN BHD reports that core net profit for the first nine months of FY2025 (9MFY25) for LBS Bina Group Bhd met expectations, largely driven by strategic initiatives and a robust development pipeline. The investment bank maintains its “BUY” recommendation with an unchanged target price of RM0.64.

Performance Review

The company’s core net profit of RM85 million for 9MFY25 was in line with expectations, accounting for 73% of the FY25 forecast. Property development remained the primary driver, contributing 95% to group revenue.

On a quarter-on-quarter (QoQ) basis, both topline and bottomline saw significant elevation, rising by 46% and 8% respectively. This strong performance was attributed to accelerated development activities across key ongoing projects such as LBS Alam Perdana, KITA @ Cybersouth, Prestige Residence, and Idaman. New launches, including Alam Perdana Industrial Park 4 (GDV: RM85.8m) and KITA Avenue Square (GDV: RM61.3m), further bolstered results. However, QoQ margins for gross, net profit, and EBITDA saw a decline of 2.3-9.7 percentage points, primarily due to a higher cost of sales margin of 75% compared to 65% in the previous quarter.

Year-on-year (YoY), revenue experienced a 5% decline, mainly due to a 6% contraction in the property development segment as several projects neared completion. Core net profit also fell by 18%, impacted by weaker PAT from both property development and construction & trading divisions. Gross and net profit margins compressed by 1.2-2.1 percentage points. Despite these challenges, the EBITDA margin marginally improved by 3 basis points, driven by lower depreciation, indicating some underlying cost efficiencies.

Future Outlook

MERCURY SECURITIES remains optimistic about the company’s “8 x 8 Strategy,” which emphasizes efficient land use, township expansion, and diversified offerings across residential, commercial & retail, industrial/factory, and hospitality segments. The fourth quarter of FY25 is anticipated to be further supported by new launches in Landed D’Island Residence, Highrise Kita@Cybersouth, Industrial Telok Gong, and Landed Bandar Putera Indah, with a combined Gross Development Value (GDV) of RM1.02 billion.

In a strategic move in October 2025, the company signed two joint venture agreements with Oriental Holdings Berhad to develop Phase 1 of a 54.6-acre mixed-use project in Klebang, Melaka, marking its entry into the coastal growth corridor and expanding its footprint beyond the Klang Valley. As of October 2025, LBS holds a substantial landbank of 3,778 acres and reported unbilled sales of RM1.34 billion, representing 1.05 times its FY25E revenue, providing strong earnings visibility. Ongoing projects maintain a steady average take-up rate of 72%.

Valuation and Recommendation

MERCURY SECURITIES maintains its “BUY” recommendation for LBS Bina Group Bhd and an RNAV-derived target price of RM0.64. This target price implies a significant 60% upside from the last traded price of RM0.40. The forecast remains unchanged as earnings were within expectations, and the sizeable discount in valuation reflects ongoing macro uncertainties and a subdued near-term sector outlook.