Lian Beng Group

DMG & PARTNERS RESEARCH on 15 Oct 2012

LIAN Beng Group's (LBG) Q1 FY2013 earnings were 44.5 per cent lower y-o-y at $10.5 million, as revenue dipped 16.5 per cent y-o-y to $113.4 million. The earnings decline was due to the absence of a one-off gain in Q1 FY2012 of $7.9 million and higher operating expenses.

The lower revenue was mainly due to lower revenue from property development. While LBG has fully sold its 55 per cent-owned industrial development, it can recognise only the relevant revenue upon the project obtaining temporary occupation permit (TOP), which is expected in end-FY2013.

Outlook is expected to be healthy, backed by the government's plans for infrastructure building and its pipeline of residential project developments.

LBG has obtained approvals to develop a third workers' dormitory block in its remaining vacant plot in Mandai, which would add 1,540 beds to its existing 4,750 beds. The dormitory block is scheduled to TOP by Q4 FY2013. This parcel of land is part of the plot that will also house its industrial property, M-Space @ Mandai.

Despite the recent measures surrounding the residential property segment, LBG plans to launch its 50 per cent-owned Spottiswoode Suites and 50 per cent-owned Hougang Plaza in FY2013. Its development projects are all JVs with other builders. This would help lower any potential risks it may face in the property-development segment.

Valuation is attractive as LBG is currently trading at 4.1x FY2013F earnings. Maintain "buy", with a TP of 59 cents, based on 6x FY2013F P/E.

BUY