LBS may monetise China assets

by **Cals** Fri 12 Sep 2014, 17:22

Business & Markets 2014

Written by HLIB Research

Friday, 12 September 2014 10:34

LBS Bina Bhd
(Sept 11, RM)
Not-rated with target price of RM2.41: LBS had achieved a landmark deal in August 2013 by disposing of its 60% stake in two land parcels in China to Zhuhai Holdings Investment Group (ZHIG) for HK$1.65 billion (RM679.5 million). This has enabled development to take place on the two land parcels which, we also believe, will serve to unlock the value of the 264-acre (106.8ha) Zhuhai International Circuit (ZIC), in which LBS holds a 60% interest.
Stripping away LBS’ 15.95% stake in ZHIG and its 60% interest in the ZIC land, the company’s current share price will still be valued at a massive 50% discount to its Malaysian land bank. The upshot is that investors will still enjoy free exposure to its valuable Chinese assets, while enjoying cheap exposure to its 1,800 acres of local land bank, which carry an estimated balance gross development value of RM18 billion.
LBS intends to share the proceeds from its Zhuhai land disposal with its shareholders, with special 24-sen dividends lined up for the next four years. This is on top of its 30% regular dividend policy, translating into an attractive 6% to 8% dividend yield.
We estimate that its assets in China are worth RM970 million at the current market value but they have strong scope for further appreciation.
We believe LBS will eventually monetise these assets and pursue landbanking deals in Malaysia to beef up its land bank reserves, which are currently sufficient to last for another 10 years.
We view LBS as a unique realisable net asset value play, offering exposure to both Malaysia and China. Applying a 50% discount to our sum-of-parts valuation, our target price is RM2.41. — HLIB Research, Sept 11

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This article first appeared in The Edge Financial Daily, on September 12, 2014.
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