Investment Highlights

• We maintain our BUY call with an unchanged fair value of RM1.94, 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 has entered into an agreement with Inta Bina Group (Inta Bina) to setup a joint venture (JV) named Lagenda Inta Sdn Bhd (LISB) to carry out construction activities for Lagenda.

• Inta Bina, a listed construction company on Bursa Malaysia with market cap of RM150m, has delivered over 130 construction projects with total value of RM3.5bil.

• Paid up capital for LISB will be RM300,000, which will be contributed equally by Lagenda and Inta Bina. Expected to be operational in 1Q2022, LISB is strategically setup to expedite construction activities for Lagenda outside of Perak.

• We are positive on the news as this timely move to tap into Inta Bina’s expertise will expedite Lagenda’s master plan to expand its business of providing affordable housing to other states outside Perak.

• Financially, we expect minimal impact for FY21F-FY23F earnings from the JV. However, we expect earnings improvement from FY24F onwards by 1-3% assuming smooth execution and good cost control in the JV.

• For now, we maintain our FY21F-FY23F earnings as Lagenda is poised to achieve its FY21F sales target of RM1bil, in line with our expectations.

• Over the long run, the company’s niche in affordable homes 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 homes being built) is also a step in the right direction. Risks to our call are weaker than expected property sales and margins.

Source: AmInvest Research - 31 Jan 2022