Sell Call Take profit on LBS now, says Kenanga

Sell Call Take profit on LBS now, says Kenanga
Business & Markets 2013
Written by Ho Wah Foon of theedgemalaysia.com
Tuesday, 16 July 2013 11:27

KUALA LUMPUR (July 16): Kennaga Research is recommending investors to sell LBS BINA GROUP BHD [] at current price as the stock price has hit its ceiling.

“Since our Trading Buy recommendation on May 23, 2013, when the share price was at RM1.05, the stock has been fast approaching our fair value of RM1.43 (~+38%) in less than two months.

“Besides, it had also beaten the performance of FBM KLCI (+0.6%) and KLPRP (-2.8%) during the same period,” said Kenanga Research in a note today.

At 11.00 am today, LBS share was trading at RM1.46, up 3 sen or 2% from yesterday’s close.

The research house added that at RM1.43, LBS is trading at 9.8x FY13 PER — seen high compared to the average PER of 8.2x for smaller cap property stocks.

“Furthermore, we believe that LBS’s immediate upside could be hitting the ceiling. At this stage, we recommend investors to take profit with a view to re-enter on subsequent price weakness based on our earlier hypothesis that there could be a special dividend in 4Q13 after the completion of the proposal (of its Zhuhai assets),” said Kenanga.

Technically, LBS is seen hovering at overbought levels. “We believe that the rally is losing momentum. As such, perhaps it may be time to lock in prior gains and look to re-enter closer to the RM1.30.”

Kenanga said it is maintaining its projections of net profits of RM56 million (+22%) for FY13 for LBS.

The strong earnings growth for the year is due to top-margin projects in Bandar Saujana Putra and D’Island Residence, it added.

It also noted that the sale of Zhuhai’s asset is nearing completion.

The company had earlier proposed to dispose its Zhuhai’s investment in China, which Kenanga believes will book in RM240 million as one-off gains. The EGM to seek shareholders’ approval falls on July 19.