by S BIRRUNTHA / Pic Source: lbs.com.my

LBS Bina Group Bhd’s deal with the Melaka government to reclaim and develop land spanning 1,200 acres (485.62ha) in Tanjung Bruas is expected to provide long-term growth to the group’s earnings.

The group recently announced its plans to turn the reclaimed land into an industry hub with port facilities, including for liquified natural gas, logistic and warehouse, manufacturing and other commercial development.

JF Apex Securities Bhd head of research Lee Chung Cheng said the plan renders a golden opportunity for LBS Bina to procure sizeable tracts of lands at the coastal area of the Straits of Melaka, which is one of the world’s busiest shipping lanes.

The move will allow the group to establish a dominant presence in this growth area with access to a new market catchment particularly the industrial and commercial segment.

“Over the short-term period, we do not see any immediate earnings impact to the group as the reclamation and development of the Melaka project involves a long gestation period, five years of land reclamation and 15 years of full development,” he said in a research note yesterday.

LBS Bina owns 70% stake of the development and is required to pay RM94.9 million to the Melaka state government for the reclamation and development rights.

The group is given 18 months to complete the feasibility studies, getting necessary approvals and fulfilling conditions precedent.

Upon successful completion of reclamation works, LBS Bina shall be entitled to 80% of the reclaimed land whereas the state government shall be entitled to the remaining 20% of the area.

The firm shall complete the project’s development within 15 years from the last phase of the reclamation work.

Lee said the development would indirectly benefit LBS Bina’s listed subsidiary, MGB Bhd, for future construction works which are related to the project in respect of infrastructure and property development.

With LBS Bina’s strong presence and foothold in the Guangdong Province in China, Lee said the group could leverage the “Friendly State and Province” relationship between Melaka and Guangdong to explore bilateral investment corporations and establishments.

He said the group is confident that the industrial and commercial development will be well-received in view of its strategic location, growing economic activities in the vicinity and support from the state government.

The research firm is not overly concerned about the project’s funding, as the group is keen to partner a Chinese counterparty to work on reclamation works, as it fits into the role of financial strength, construction and port management expertise, as well as government-to-government role in fast tracking the project.

JF Apex has maintained its ‘Buy’ call on LBS Bina with a higher target price of 62 sen from 53 sen previously.

This is based on the group’s commendable sales amid prevailing soft property market, strong earnings visibility, as well as unlocking potential landbank values in China’s Zhuhai International Circuit in the immediate future.

LBS Bina recently announced the death of the group’s founder Datuk Seri Lim Bock Seng on March 28.

The company, in a Bursa filing on March 1, announced Lim’s resignation at 90 years of age as non-independent and non-executive chairman.

Lim had served as the chairman of LBS Bina since Dec 6, 2001, though his involvement with the company extends over a period of 40 years prior to the role.

LBS Bina’s shares have risen over 40% from 41 sen at the start of the year to a 52-week high of 58 sen, adding some RM265.2 million to its market value.

The counter closed one sen or 1.83% lower yesterday at 53.5 sen, giving it market capitalisation of RM839.55 million.