Investment Highlights

• We maintain our BUY call and earnings forecasts with unchanged Fair Value (FV) of RM1.94. Our FV is based on a 20% discount to its RNAV (Exhibit 2), and after including a 3% premium to reflect its 4-star ESG rating (Exhibit 3). Lagenda 9MFY21 earnings was within expectation. Excluding non-cash accounting adjustment effect, 3QFY21 earnings improved 6% QoQ and 11% YoY.

• Earnings in line. Lagenda’s 9MFY21 net profit of RM144.0m made up 63% and 64% of our and consensus earnings estimates. We deem the result to be in line as we expect 4Q earnings to be stronger. Recall that Perak has moved into National Recovery Plan Phase 3 on 18-Oct and subsequently Phase 4 on 8-Nov. This should translate into higher progress billing and revenue from the construction segment. As expected, no dividend was announced.

• YoY, 3QFY21 earnings declined 9% due to high base effect in 3QFY20. Recall that in 3QFY20, there was an accounting gain of RM14.3m recognized as “inter-group elimination” arising from the restructuring exercise back then. Excluding this, we estimate that 3QFY21 net profit increased by 11% YoY. QoQ, earnings improved 6% as its newly acquired subsidiary Maxitanah Sdn. Bhd. Has started its contribution.

• Achieved strong sales and bookings of RM1.18 billion in 9MFY21. For the breakdown, RM496m was confirmed sales with booking at RM648m. Due to the Movement Control Order (MCO) in 3QFY21, we understand that there was delay in converting the booking into sales. As the Company has strong conversion rate of 90% historically, we believe that it is likely to meet the target sales of RM1.0 billion in FY21. Unbilled sales stands at RM591m which is an improvement as compared to end- 2QFY21’s RM561m.

• Lagenda is optimistic that its property launches will continue to register high take-up rates. Hence, it plans to launch 6,000 affordable house in the next 12 months.

• Maintain BUY on Lagenda. For FY21, Lagenda is poised to achieve its sales target of RM1 billion. Over the long run, the Company’s niche in the affordable market bodes well for its prospect as this is the segment with the strongest demand in the property market. Its focus on ESG (via installation of PV solar system in the home that it build) is also a step in the right direction. Risks to our call are weaker than expected property sales and margins.

Source: AmInvest Research - 16 Nov 2021