Part of the job of the localnet script is setting the system's hostname. This needs to be configured in the /etc/sysconfig/network file.
Create the /etc/sysconfig/network file and enter a hostname by running:
echo "HOSTNAME=<lfs>" > /etc/sysconfig/network
<lfs> needs to be replaced with the name given to the computer. Do not enter the Fully Qualified Domain Name (FQDN) here. That information will be put in the /etc/hosts file in the next section.