LBS ... dated April 2012

Over the years, there has been speculation about LBS’ intention to cash out of its China venture, but this gained momentum after the project’s land value appreciated sharply.

Sources say LBS will ink a deal soon to dispose of its 50% stake in two joint ventures in China , one involving a golf course and the other a proposed 197 acre property development in Zhuhai.

LBS’ total borrowings as at Dec 31, 2011 stood at rm480 million against total shareholdings’ funds of rm509 million. It had cash and bank balances of rm65.26 million as at Dec 31, 2011 and was in a negative cash position with rm33.02 million net cash used in operating activities.

Market observers say if LBS does exit China , it would be positive for the group. The China ventures have put a bit damper on LBS. And the hype surrounding the China property market is over for now (April 2012). So it would be better if LBS focused on Malaysia instead.

Although it is not known how much LBS’ 50% stakes in its China joint ventures will be valued at, Lakewood Gold Club is carried in its books at a net value of rm195 million based on a valuation carried out in 2008.

While LBS could book a substantial one off gain from the disposal of its China joint ventures, market observers do not expect a hefty dividend payout as the company could use the proceeds to pare down debt or grow its domestic landbank.

It had locked in sales of rm280 million in 1QFY2012 with unbilled sales standing of rm693 million as at March 31, 2011.

Property development has been LBS’ main earnings generator and only profitable division over the last few years.