KUALA LUMPUR: CIMB Equities Research is retaining LBS Bina Group as one of its top picks among the Malaysian developers given its strong sales momentum and attractive dividend yield of 6% in 2017.

It said on Wednesday the fundamentals are intact and approvals for the China Zhuhai International Circuit (ZIC) upgrade will provide a shot in the arm to its share price.

“We retain our target price of RM2.55, based on a 30% discount to RNAV. The key downside risk to our Add call is a sudden deterioration in the property market and lower-than-expected sales,” it said.

CIMB Research said LBS sprang a surprise by announcing a two-for-one share split followed by a one-for-10 bonus issue of up to 163 million shares to be issued at a date to be announced later.

The proposed bonus issue will not be implemented on a staggered basis and will be implemented concurrently with the proposed share split.

The bonus issue will be capitalised from LBS’s share premium and retained profits. The rationale for the exercise is to reward existing shareholders and boost liquidity.

Assuming the resale of all the existing treasury shares, the full exercise of the outstanding warrants and ESOS, and full conversion of the outstanding RCPS, the share split will raise LBS’s share capital from 815 million shares to 1.630 billion units.

The following one-for-10 bonus issue will further boost the group’s share base to 1.793 million shares.

“We believe that the deal will improve the liquidity of LBS’s shares and enhance the marketability of the company’s shares.

“The share split and bonus issue will not have an impact on our earnings forecast. Naturally, our FY17-19 EPS will be reduced by 55% (FY17 EPS from 14 sen to six sen) after the shares go ex.

“With the enlarged share base and proceeds from conversion, our ex-share split and ex-bonus target price will be RM1.20, based on a 30% discount to RNAV.

“While the deal will not impact our earnings forecasts, we think the share split and bonus issue will be viewed positively by some shareholders and investors as a form of reward, which could spur short-term interest in the counter given the currently buoyant market,” it said.