Investment Highlights

• We maintain our BUY call and forecasts, but raise our fair value (FV) by 5% to RM1.94/share (from RM1.84/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 2). 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, via 70%-owned unit, is acquiring freehold agricultural land measuring 431 acres in Mersing, Johor, for RM45.1mil cash from UEM Sunrise. Located near established townships Taman Mersing and Taman Wawasan Indah, and Plaza D’Jeti, the land is earmarked for a self-contained affordable township development with a GDV of RM985mil over five years, based on our estimates.

• At about RM2.40 per sq ft (psf), the price tag appears to be consistent with the asking price range of between RM3.00 and RM6.50 psf for land parcels up for sale in the same area based on our research (asking prices are generally higher than actual transacted prices).

• We are positive on the latest development. The new acquisition will increase Lagenda’s GDV by 13% to RM6.1bil. Lagenda plans to launch its 6th township on the 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 (Bandar Baru Setia Awan Perdana), Teluk Intan (Lagenda Teluk Intan) and Tapah (3rdtownship), 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 - 5 Jul 2021