LBS to raise RM135m via sukuk issuance

KUALA LUMPUR: LBS Bina Group Bhd is planning to raise RM135 million via a sukuk programme to finance its housing development projects in Batu Pahat, Cameron Highlands and Puchong valued at RM600 million.

LBS has appointed MIMB Investment Bank Bhd, a wholly owned subsidiary of EON Bank Bhd, as the principal adviser and lead arranger for the sukuk programme.

The RM135 million programme would consist of commercial papers and medium-term notes under the Islamic concept, said MIMB investment banking director and co-head Ng Chee Kiet.

"The sukuk comprises commercial papers which MIMB would act as an underwriter for up to RM15 million, and also medium-term notes to provide mid-term financing. The first issuance is expected to be completed by the end of this month," he said at the signing ceremony between LBS Bina and MIMB here on Tuesday that was witnessed by Housing and Local Government Minister Datuk Chor Chee Heung.

Ng said the sukuk would be guaranteed by Danajamin Nasional Bhd, which would fetch an AAA (fg) rating, the highest rating accorded to securities by Malaysian Rating Corporation Bhd.

"Because it is guaranteed by Danajamin, (the price) would be be close to government-guaranteed yield. Currently, we are looking at 50 to 60 basis points above government securities. Total cost would be about 4% to 5%," he said.

LBS managing director Datuk Lim Hock San said proceeds from the sukuk would be used mainly for its proposed development projects in Bandar Putera Indah in Batu Pahat, D'Puchong in Puchong, and Taman Royal Lily in Cameron Highlands.

"LBS' entry into the large liquidity pool of the Malaysian Islamic capital market allows the group to diversify its sources of funding while lowering cost of financing," he said, adding that investors could enjoy the yield with peace of mind under Danajamin's guarantee.

Looking forward, Lim said LBS expected to return to the black this year on the unrealised sales it had achieved in the last 18 months.

"We incurred losses last year because we foresaw the financial crisis and did not launch any low- and medium-cost products in 2008.

"2009 onwards, we started launching aggressively and we saw RM317 million in sales that year.This year, we have achieved RM180 million so far. The profits from these sales would only be realised at the end of this year and next year. Therefore, we foresee that we could break even or register a small profit this year," he said.

For the financial year ended Dec 31 2009, LBS incurred a net loss of RM16.8 million versus a net profit of RM21.5 million or 5.58 sen earnings per share in the previous year. Revenue fell 22% to RM203 million from RM261.25 million. It had a negative operating cash flow of RM42 million during the year.

As at March 31, LBS had total borrowings of RM308 million comprising RM108 million short-term loans, RM20 million short-term secured serial bonds and RM180 million long-term borrowings, while shareholders' fund stood at RM406 million. Its cash and cash equivalents amounted to RM44.04 million, excluding RM7.2 million held in housing development accounts.

"We are also confident of selling more units with upcoming launches. Almost all 26 units of the double-storey houses in Cameron Highlands have been sold.

"The Bandar Putera Indah project which comprises 218 units of semi-detached houses would be launched in the next two months, while D'Puchong comprising 122 superlinks would be launched by the end of the year," Lim said, adding that the outlook for the property market was good for the next two years.

LBS currently has a 2,300 acre (931ha) landbank in Malaysia and China, including 190 acres in Zhuhai, China, for which it is developing with Hong Kong-listed partner Jiuzhou Development Co Ltd.

Lim said the project in Zhuhai was expected to be launched next year, after three years of delay due to the alignment of light rail transit (LRT) tracks in the area.