Highlights

AmInvest Research Reports

Author: AmInvest   |   Latest post: Tue, 22 Jun 2021, 5:28 PM

 

Lagenda Properties - Taking the affordable way to being profitable

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Investment Highlights

  • We initiate coverage on Lagenda Properties (Lagenda) with a BUY call and fair value of RM1.95/share, based on a 20% discount to its RNAV (Exhibit 13), and after including a 3% premium to reflect our 4-star ESG rating (Exhibit 14). This compares with about a 40% discount to RNAV the market generally accords to affordable property developers of a similar size to take into account Lagenda’s defensive customer profile of public servants who are less susceptible to economic cycles and a strong management team.
  • Lagenda is a Perak-based property developer that focuses on low-cost/affordable housing in self-sustaining townships. With a price range of RM150K–RM200K/unit, the properties are targeted at the B40 and M40 income groups.
  • The investment merits of Lagenda are as follows:
  1. There is a bright spot amidst a multi-year slump in the local property market, i.e. the affordable segment that caters to owner-occupier house buyers, vs. property investors/speculators. This demand for such housing is driven by the increasing number of new households (comprising relatively young population demographics), rapid urbanisation and the trend towards single-person households and nuclear families, vs. extended families in the past.
     
  2. Lagenda’s townships have a niche market, i.e. civil servants (who make up close of 80% of all buyers) with stable incomes/strong job security that are less susceptible to economic cycles. The high civil servant population in these locations is attributed to the presence of the home base of the Royal Malaysian Navy and various other government institutions and public/private universities in their vicinities.
     
  3.  A strong management team as reflected in Lagenda’s ability to: (i) consistently acquire land at good prices thanks to its deep understanding and extensive networking in its home turf; (ii) keep the construction cost low (without compromising on the quality) thanks to a pool of reliable subcontractors; and (iii) effect fast turnaround due to its strong working relationships with various authorities.
  • At about 35% discount to its RNAV, we believe Lagenda offers a good proxy to the resilient affordable housing segment, a defensive public servant customer profile and a highly business-savvy management team.

Source: AmInvest Research - 12 Mar 2021

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