MARC Ratings has affirmed its AA-IS rating on LBS Bina Group Berhad's Islamic Medium-Term Notes Programme of up to RM750.0 million with a stable outlook.
The ratings agency said the affirmed rating is underpinned by LBS Bina's strong developmental track record, healthy operating margins and large unbilled sales. Moderating the rating are the group's exposure to demand risk for its sizeable planned projects and potential increase in borrowings.
It also opines that LBS Bina has established a solid record in the affordable and mid-market residential property segment, which accounts for about 82% of its ongoing developments worth RM4.8 billion. As at end-June 2024, the group recorded a healthy overall take-up rate of 79%, excluding projects launched in 2Q2024. Over the next two years, the group is expected to launch developments with an estimated gross development value (GDV) of RM4.8 billion, most of which are located in its existing Klang Valley projects. While the group is exposed to demand risk, this is partly mitigated by LBS Bina's continued focus on affordable development — about 64% of planned GDV consists of units priced around or below RM500,000 — where demand is more resilient.
MARC Ratings notes that LBS Bina's landbank of about 2,500 acres, largely located in Kuala Langat and Cyberjaya in the Klang Valley, and Batu Pahat and Kota Tinggi in Johor, provides long-term development opportunities. Operating profit margins have remained at a comfortable 16%-20% over the last five years, aided by the group's modular construction system that has minimised material wastages and improved productivity.
In 1H2024, LBS Bina recorded 2.4% and 6.0% y-o-y increases in revenue and pre-tax profit to RM770.1 million and RM122.2 million. The improvements were driven by progress billings on the well taken-up KITA@Cybersouth, LBS Alam Perdana, Prestige Residence and Idaman projects. Borrowings increased to RM1.2 billion as at end-June 2024 from RM961.3 million as at end-2023, to fund the group's ongoing developments as well as its planned launches in 2H2024 and 2025. Gross debt-to-equity ratio stood at 0.72x as at end-1H2024. The group's unencumbered cash and bank balances stood at RM322.2 million as at end-1H2024, and will be bolstered by sizeable unbilled sales of RM1.7 billion, as well as proceeds of RM272.6 million from the disposal of its racing circuit business in China in June 2024.
