Investment Highlights

• We maintain our BUY call and forecasts. Having updated and tied up certain loose ends in the GDV estimates, we reduce our fair value (FV) by 9% to RM1.79/share (from RM1.95/share) based on a 15% discount to its RNAV (Exhibit 2), and after including a 3% premium to reflect its 4-star ESG rating (Exhibit 3). This compares with about 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’s 1QFY21 core net profit came in within expectations at 24% of our full-year forecast and 26% of full-year consensus estimates respectively.

• It recorded a 1QFY21 core net profit of RM55.6mil underpinned by property development business injected into the company in 3QFY20 pursuant to a reverse takeover by a new controlling shareholder (yoy comparison is therefore not meaningful). The corporate exercise has transformed the company into an affordable housing developer.

• In 1QFY21, despite the pandemic, it sold a total of 693 units of affordable homes, mainly from its two major townships Bandar Baru Setia Awan Perdana (BBSAP) and Lagenda Teluk Intan (LTI) Phase 2. We gathered that the group is on track for its 3rd township launch – consisting of 2,400 units of affordable homes in Tapah, Perak, with a GDV of RM360mil within FY21F.

• We expect stable profits in coming quarters driven by: (1) progress billings from unbilled sales (that stood at RM515mil as at end-March 2021); and (2) RM1.1bil new launches in FY21F, comprising of 6,300 units of affordable housing units (with an average selling price of c.RM175k/unit) in Sitiawan (BBSAP), Teluk Intan (LTI) and Tapah (3rd township).

• We continue to like Lagenda as it offers a good proxy to the resilient affordable housing segment, a defensive public servant customer profile and a highly businesssavvy management team.

Source: AmInvest Research - 27 May 2021