KUALA LUMPUR: JF Apex Research has maintained its Buy call on LBS Bina Group Bhd with an unchanged target price of RM2.27.

On a recent visit to LBS Bina's 60%-owned Zhuhai Internatonal Circuit (ZIC), Lakewood Hills property project and HK-Zhuhai-Macau Bridge (HKZMZB), the research firm had a firsthand look at Zhuhai's economy and property outlook.

According to JF Apex, the HKZMB is a sea-crossing project comprising of three-lane expressway bridges and one undersea tunnel, connecting Hong Kong with Macau and Zhuhai. Construction of the 42km link began in December 2009 and is targeted for public opening to traffic in March/April 2018.

"Upon completion of the HKZMB, the travel time between the two destinations will be shortened to 30 minutes with projected traffic volume of 15k vehicles/day. Thus, Zhuhai would benefit substantially from the mobility of human traffic, cross border trades and business establishments particularly in the areas of property sector, retail, logistics and services, said JF Apex Research.

It expects Zhuhai's property prices to catch up to the high prices in Hong Kong and Macau. However, a new ruling only allows non-citizens to own residential property in the district after paying government taxes or contributing to social security for five years.

"We have been told that average residential property price in Zhuhai is currently at RMB20k/sm with city centre and Hengqin (special economic zone) could command as high as RMB30-50k/sm and RMB50k/sm respectively against Macau’s property price of RMB80-100k/sm," said JF Apex Research.

With regards to the ZIC, there are plans to transform the racing circuit to encompass tourism, a cultural-related theme and motor sport.

While ZIC is currently self-sustaining on cash flow basis, the racing circuit still incurs net loss to LBS mainly due to depreciation and amortization.

"LBS is currently exploring the best options to realise its potential landbank values in this 264-acre ZIC, which may include outright sales and/or JV with its China party to co-develop the land, or even listing of ZIC in HK/China.

"We opine that the Group shall dispose the land in view of sizeable land premium to be incurred should the Group choose to embark on the development plan. Furthermore, LBS may require massive capital to develop the said project with its long gestation period," said the research firm

JF Apex Research said the market views positively the share split and bonus issue announced by LBS Buna as it will boost stock liquidity and reward its existing shareholders. On the negative side, the exercise will dilute the group's earnings per share by 54% for its 2018F.