SCHOOL OF ARCHITECTURE, BUILDING AND DESIGN

FOUNDATION IN NATURAL AND BUILT ENVIRONMENT

Basic Accounting (ACC30205)

Assignment: Financial Ratio Analysis

Company Name : LBS Bina

Lecturer: Ms. Tay Shir Men

Group Members: Calvin Wong Kim Ming (0323642)

Chiang Lin Chew (0322923)

Ti Cheng Jie (0323931)

Zachary Ooi Cheng En (0323120)

Table of Content

NO. CONTENT PAGE NO.

1. History of LBS Group Berhad 1

2. Recent Development 2-3

3. Profitability Ratio 4-5

4. Stability Ratio 6-7

5. Price Earning Ratio 8-10

6. Investment Recommendation 11-12

7. Appendix 13-198. References 20

Brief Background History of LBS

LBS Bina Group Berhad is a prominent property developer in Malaysia. Having been around for more than 20 years, LBS Bina has built a strong reputation for developing high quality properties all over Malaysia and abroad.

The history behind LBS Bina actually dates back longer than that when Datuk Lim Bock Seng started a construction business in Petaling Jaya which would later grow to become one of the most significant property developers in Malaysia.

LBS would then expand further in 1992 when it ventured into the property development sector through the Jelapang Maju Light Industrial Park in Perak. That would be the springboard to more projects as LBS continued to grow exponentially. Before long, the company was undertaking several large projects including its flagship projects like the Taman Perindustrian Bukit Serdang Seksyen 14, Taman Pinggiran Putra and the very popular Bandar Saujana Putra, which was a mega project.

Since then, LBS has continued to expand and grow where it is among the primary players in the Malaysian market while it is expanding further outside the country into China, seen as one of the most challenging markets in the world. Today, LBS is involved not only in property development but in several other related areas like property management, building materials and landscaping, among others.

Among other projects that LBS has been involved in include the very popular The Lake Residences in Puchong, D’Island Residences, Indigo Homes, Pearl Villa, Topaz III and IV, the Ivory Residences II, Magenta Homes and I Hub Puchong.

Recent Development

PROPERTY developer LBS Bina Group Bhd (LBS) will be showcasing its popular developments at the Stylish Living Property Fair by StarProperty.my which will be held from today till Sunday in the Kuala Lumpur Convention Centre.

“In line with this year’s theme, LBS aims to make stylish living accessible to different property segments, whether it is affordable, medium or high-end.

“In addition to the attractive incentives, rebates and discounts available, our developments are expected to meet the demands of homebuyers and investors alike,” said LBS managing director Datuk Lim Hock San.

Buyers can expect to view five LBS developments — BSP Skypark (Bandar Saujana Putra), Barrington Square (Cameron Golden Hills), Balvia, Nautilus as well as D’ Island Residence.

Catering to young families and first-time homebuyers, BSP Skypark boasts 689 serviced residence units alongside 32 commercial units. Priced from RM400,900, with a gross built-up area from 1,004 sq ft, the serviced residences feature a three-bedroom, two-bathroom layout. The commercial units come with gross built up area from 1,030 sq ft and are priced from RM618,000.

Another in demand development by LBS is Barrington Square located in Cameron Golden Hills, Cameron Highlands. Similar to BSP Skypark, LBS incorporates the element of convenience in Barrington Square’s shop apartments.

Each apartment unit boasts a built-up area from 581 sq ft to 1,345 sq ft while the shop units have a built-up area from 1,001 sq ft. Buyers have an option of three apartment styles to choose from namely a studio unit priced from RM301,800, two-room apartment from RM356,800 and penthouses with two to three rooms from RM487,800. Shops units on the lower ground floor are priced from RM750,800.

Delivering more options in the high-end market segment, LBS will also be featuring its flagship development, namely Balvia, Nautilus and D’ Island Residence. Inspired by Thai elements, Balvia homes offer a larger layout option with a gross built-up area of 4,864 sq ft and land size of 40’x80’.

The three-storey semi-detached houses come with a luxurious five bedrooms with six bathrooms plus two utility rooms. Priced from RM2.5mil, Balvia units come with a range of value added features which include a lift, rainwater harvesting system and alarm as well as intercom system.

Phase one of Balvia is expected to be completed by November 2013.

Located on the Scandinavian-inspired coast of D’ Island Residence, Nautilus offers a selection of two layout types, such as 24’ x 100’ (Type A) and 24’ x 80’ (Type B) which have a gross built-up area from 4,791 sq ft and 4,246 sq ft, respectively.

The three-storey superlink home offers an exquisite five bedroom, one utility and six bathroom layout and is priced from RM1.9mil for Type A and RM1.8mil for Type B. Nautilus’ unique features include solar panels, a lift, rain water harvesting system, hot water piping and alarm as well as intercom system.

Phase one of Nautilus is expected to be completed by the second quarter of 2014.

Buyers who want the freedom to design their dream homes can explore the benefits of D’ Island Residences’ bungalow lands. Located on the north and north-west coast of D’ Island Residence, the vacant land area ranges from 6,566 sq ft to 11,452 sq ft priced from RM260 to RM300 per sq ft.

A RM50,000 moving-in incentive awaits buyers who successfully complete the construction of bungalows within five years from the vacant possession date. Phase one of the bungalow land is expected to be ready by November 2013.

Profitability Ratio

The following table shows profitability ratio calculation and interpretation for LBS Bina in the year 2012 and 2013.

Profitability Ratio

2012 2013 Interpretation

Return on Equity (ROE)

509,644,355516,690,656.5

X100%

=98.6%

533,532,722699,735,858

X100%

=76.2%

Higher ROE in the year 2012 compared to 2013 shows that the business, LBS Bina is earning higher returns of capital in 2012.

Net Profit Margin (NPM)

39,003,430509,644,355

X100%

=9.4%

397,323,654533,532,722

X100%

=74.5%

An increase in NPM for the year 2013 is a positive sign and it indicates that LBS Bina kept its expenses lower compared to the year 2012. Thus, this gives the business more profit for 2013. Furthermore, this shows that LBS Bina controlled their overall expenses better in 2013

Gross Profit Margin (GPM)

146,227,906509,644,355

X100%

=28.1%

168,577,154533,532,722

X100%

=31.6%

This measures LBS Bina’s ability to control their COGS expense. A higher GPM means that the expense is better managed. The COGS expenses are well managed in 2013 resulting in a higher GPM.

General Exp. Ratio (GER)

67,470,147509,644,355

X100%

=13.2%

85,596,945533,532,722

X100%

=16.0%

The year 2013 shows that the GER is higher compared to 2012. A higher general expense would result in a lower NPM.

Financial Exp. 18,457,247509,644,355

15,170,850533,532,722

FER in the year 2013 is lower than 2012.

Ratio (FER)X100%

=3.6%

X100%

=2.8%

This indicates that the financial expense in 2013 is lesser than 2012. As such, this leads to a higher NPM in 2013 because the financial expense is lower.

Financial Stability Ratio

The following table shows the profitability ratio calculation and interpretation for LBS Bina in the year 2013 and 2013.

Stability Ratio

2012 2013 Interpretation

Working Capital (WCR)

927,829,389520,720,661

=0.62:1

925,492,766609,599,483

=1.52:1

For every RM1 of current liability in the year 2013, the business, LBS Bina has 1.52 of current assets to pay for it. It has a higher ratio than 2012. However, a business should preferably have a minimum of 2:1 of current assets to current liability to ensure that the business does not face difficulties.

Total Debt (TDR)

908,176,8341,435,008,317

X100%

=63.6%

1,137,172,4372,009,812,670

X100%

=56.6%

For 2013, the TDR is lower than 2012, having a TDR of 63.6% and 56.6% respectively. As the TDR is lower than in 2013, this results in a higher amount of owner’s equity. It is strongly advised that a business’ TDR does not exceed more than 50% as it would have a higher risk of bankruptcy.

Inventory Turnover Ratio (ITR)

365days ÷363,416,44915,721,777.5

=16 days

365 days ÷364,955,5687,934,313

=8 days

It takes 8 days for the business in 2013 to sell one batch of goods. The business in 2013 can sell goods rapidly, generating more cash quickly to pay off its liabilities.

Interest Coverage Ratio (ICR)

18,457,247+75,014,26018,457,247

=5.1 times

426,901,921+15,170,85015,170,850

=29.1 times

LBS Bina’s ICR is higher in 2013 than in 2012. This means that the business’ ability to pay off its interest expense in higher than 2012. In the year 2013, LBS Bina has enough profit to pay its interest expenses 29.1 times. To avoid bankruptcy, a business’ interest coverage should not fall below 5 times.

Price Earning Ratio (P/E Ratio)

2012

Basic earnings per share: 9.7

Current share price: 0.84

(0.84/9.70)= 8.148

2013

Basic earnings per share: 96.09

Current share price: 1.56

(1.56/96.09)= 0.016

The P/E ratio measures how expensive a share is. In the year 2012, the P/E ratio is 8.148 while in the year 2013 the P/E ratio is 0.016. This means that the share in 2013 is less expensive compared to the share in the year 2012. A P/E ratio of 0.016 indicates that an investor will need to wait for 0.016 years to recoup his investment.

LBS Bina Group Bhd (5789.KL)

FTSE Bursa Malaysia KLCI (^KLSE)

Based on the graph above, it shows that the share price for LBS Bina Group Bhd and index for FTSE Bursa Malaysia KLCI. Before determining whether to invest in either in a company or a overall market share KLCI, which company has a better percentage over the time period from May 2015 to February 2016 must be understood. Hence, 3 different points of the time will be viewed ti determined the performance of both the graph.

First point of the time, the share price of LBS Bina Group Bhd is 1.74 on 7 May 2014, and the index for FTSE Bursa Malaysia KLCI is 1805.10. At 17 July 2015, the share price decrease to 1.69 and the index decrease to 1574.67. The decrease of the share price is (1.69-1.74)/1.74 = -2.87% whereas the index changes is (1574.67–1805.10)/ 1805.10 = -12.7%. This is to say that the performance of the company is better than the index.

The share price of LBS Bina Group Bhd is 1.7200 on 20 August 2014, and the index for FTSE Bursa Malaysia KLCI is 1577.41. At 21 November 2014, the share price decrease to 1.7000 and the index increase to 1661.89. The decrease of share price is (1.7000-1.7200)/ 1.7200= -1.16%, whereas the index changes is (1.661.89-1577.41)/1661.89= 5.08%. As such, the performance of the company is worse than the index this time.

For the final of the graph, on 8 July 2015 which the share price is 1.5200 for LBS Bina Group Bhd and the index for FTSE Bursa Malaysia KLCI is 1695.83. At 7 August 2015, the share price decrease to 1.4600 and the index price also decrease to 1682.65. The decrease of share price is (1.4600 – 1.5200)/1.5200= -3.94%, whereas the index changes is (1682.65 – 1695.83)/1695.83= - 0.78%. Hence, the performance of the company is worse than the index this time.

By comparing LBS Bina Group Bhd with the overall market share KLCI, LBS Bina is continuously dropping, while FTSE Bursa Malaysia is also decreasing although there are times where is raised but not as bad as LBS Group. Furthermore, the 3 point of time that has been calculated shows that LBS Group Bhd is not recommended for investing in.

Investment Recommendation● Transforming into a significant medium to high-end developer. LBS Bina

Group Berhad (LBS) has long been recognised as a low-to-medium cost

developer. The Group has recently rebranded its corporate image and

reposition itself to become one of the significant medium-to-high end property

players after realising that its previous business model failed to withstand the

financial crisis in 2008. We believe the stock will be back into investors' radar

screen once it posts more convincing earnings this year and its successful

launches of high-profile project, D'Island, in Klang Valley.

● Strong turnaround. LBS has successfully returned to the black in 2010 by

achieving RM16.5m net profit against losses of RM17.2m posted in 2009

thanks to strong sales and higher margin achieved from its medium-to-high

end projects. Going forward, we estimate the Group to record net profit of

RM40.1m in 2011F, a whopping jump of 142.6% yoy and maintaining its

profit momentum for 2012F and 2013F with net profit of RM83.4m and

RM119.7m respectively.

● RM9.1b sizeable GDV to sustain the Group's earnings over the next 10-15

years. LBS has a total undeveloped land bank of 2,400 acres in Klang Valley,

Cameron Highlands, Perak, Johor and China yielding total GDV of RM9.1b

(ex-China). The Group targets to launch its flagship high-end project,

D'Island, in Puchong in September 2011. The response for the pre-sales is

encouraging with 90% take-up for the 122 units of 3-storey superlink houses

being launched, pricing over a million or RM370-400psf.

● Strong unbilled sales. The Group has successfully chalked in about RM591m

unbilled sales which provides earnings visibility of almost 1.7x of the Group's

2010 revenue of RM341m. Going forward, LBS is expected to continue to

achieve impressive new sales with its strategy of focusing middle to high

income level house buyers, which is less prone to rising cost of living.

Attractive valuation with potential 165% upside. Our non-rated target price for LBS is RM2.03, which is based on 50% discount to its RNAV/share of RM4.07 in view of LBS being a small cap stock. Our target price also implies 9.4x 2012F and 6.5x 2012F PER. Current valuations look attractive as it is trading at 7.4x 2011F and 3.6x 2012F PER, which is significantly lower than the sector average of 13-14x.

Appendix

Referenceshttp://quotes.wsj.com/MY/XKLS/LBS/company-peoplehttp://quotes.wsj.com/MY/LBS/financials

http://quotes.wsj.com/MY/XKLS/LBS/company-people

http://klse.i3investor.com/servlets/ptres/4720.js