8494 LBICAP

Company Overview

·         Three business activity & sales %:

                      i.        Management services - 3.74%

                    ii.        Development of properties - 96.03%

                   iii.        Trading of rubber product - 0.23%

·         Company website: http://www.lbi-capital.com.my/

Personal Comment

·         LBICAP is a low profile company; its trading of stock volume is low.

·         It hit lot of criteria to pick a good fundamental company, that is:        

                      i.        PE low with 5.

                    ii.        High ROE with 16.67%.

                   iii.        Acceptable DY with 3.56%.

                   iv.        High NTA with RM 1.66.

                    v.        V. ROA with 10%.

·         But cash flow is the weakness of LBICAP, historical cash flow in category operating and financing activities giving bad result.

·         After deduct total bank borrowing from cash holding, LBICAP is a net negative cash company.

·         LBICAP should solve its cash problem to be a healthy cash company.

·         On the hand, free cash flow of LBICAP is showing healthy and it is increasing in yearly.

·         From earning valuation model, it giving intrinsic value RM 2.02.

·         The catalyst needed by LBICAP is new property development project.

·         In Greenblatt's Magic Formula, earning yield and return on capital giving 11% and 12%% respectively.

Additional Information

·         Property development is the source of revenue and revenue of LBICAP. Current LBICAP's townhouse project Desa Saujana 2 at side of completion period.

·         Second phase of industrial turnkey development I-Hub@Puchong expected launched this year.

·         Project in Section 14, PJ which h comprising 11 units bungalow expected launched by Q3''2015.

·         LBICAP also planning to redevelop earlier wet market plan into 24 units’ double storey shop office.

·         LBICAP’s bank borrowing need cleared soon because the maturity within one and two years amounted to RM 34,143,262.

·         There is uptrend on Revenue, Net profit and ROE since year 2011.

·         Dividend is decreasing since year 2012 but the DY is maintained above 3%.

·         Here a latest news showing LBICAP going disposed 4 lands with RM 50 million, management going use this cash by:

                      i.        RM 3.5 million clears bank borrowing.

                    ii.        RM 25 million acquires other land.

                   iii.        RM 18 million used on working capital.

                   iv.        Amount left charged by RPGT and expenses.

·         Director's active transaction on acquire LBICAP shares and warrant - http://www.klse.my/stock/insider/director/all/8494.jsp#stockDetailDiv

·         LBICAP's active shares buy back activity in year 2015 - http://www.klse.my/stock/insider/company/shareBuyback/8494.jsp#stockDetailDiv

·         LBICAP's last buy back share is year 2010, and next is year 2015, is it management think the current price of LBICAP is undervalued?

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