Investment Highlights

• We maintain our BUY call and forecasts, while raising our fair value (FV) by 3% to RM1.84/share (from RM1.79/share) based on a 20% discount to its RNAV (Exhibit 1), after reflecting the enhancement from the latest land acquisition and 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 is acquiring leasehold land measuring 500 acres in Kuantan, Pahang, for RM33.0mil cash (see Exhibit 2 for the location). Located near the established township of Taman Indera Sempurna and several local landmarks such as the Kuantan Agricultural Machinery Training Centre and Pahang Islamic College, the land is earmarked for a self contained affordable township development with a GDV of RM1.0bil over 5 years, based on our estimates.

• At about RM1.52 per sq ft (psf), the price tag is at a 28% discount to an April 2021 valuation of RM2.11 psf by independent valuers. From our research, we are aware of only one large tract of land up for sale in the vicinity, i.e. a 93-acre plot in Gambang, Kuantan, with a significantly higher asking price of RM45mil or about RM11 psf. We believe it is not strictly comparable given its: (1) smaller size; (2) development land title (vs. agricultural of the land Lagenda is acquiring).

• We are positive on the latest development. The new acquisition will increase Lagenda’s GDV by 23% to RM5.4bil. Lagenda plans to launch its 5th township on this newly acquired land.

• Meanwhile, we expect stable profits in the 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 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), all in Perak.

• 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 business savvy management team.

Source: AmInvest Research - 24 Jun 2021