Investment Highlights

• We maintain our BUY call and earnings forecasts with a lower fair value (FV) of RM1.90 (previously RM1.94). Our FV is based on a 20% discount to its RNAV (Exhibit 2), and includes a 3% premium to reflect its 4-star ESG rating (Exhibit 3).

• Earnings estimates reduced. FY22/FY23 earnings have been reduced by 9%/7% to RM261mil/RM305mil. We have adjusted the timing for its progressive billings. Accordingly, our FV has been lowered to RM1.90.

• Lagenda’s FY21 net profit of RM200.5mil made up 88% and 94% of our and consensus earnings estimates respectively. The earnings miss was attributed to slowerthan-expected revenue recognition.

• Recall that Perak has only moved into the National Recovery Plan’s Phase 3 on 18 Oct 2021 and subsequently Phase 4 on 8 Nov 2021. A dividend of 3.5 sen was announced bringing total dividend in FY21 to 6.5 sen. This is higher than FY20’s 2.5 sen.

• YoY, FY21 earnings improved 42% YoY in line with better revenue (+20% YoY to RM835.5mil). The higher revenue was attributed to strong sales and higher completion of development work done. QoQ, 4QFY21 earnings climbed 24% as Lagenda’s catch-up initiative has resulted in higher revenue recognized (+36% QoQ to RM251.1mil).

• Strong sales and bookings of RM1.41bil in FY21. Breaking it down, RM757mil comprised confirmed sales with booking at RM649mil. Unbilled sales stood at a higher RM604mil vs. RM591mil in end-3QFY21. 4QFY21’s confirmed sales of RM261mil rose 39% YoY.

• We continue to like Lagenda due to: i) expected earnings growth of 30% in FY22 backed by its unbilled sales and good sales prospect; ii) its niche in the affordable market which bodes well for its prospects as this is the segment with the strongest demand in the property market; and iii) its focus on ESG (via the installation of PV solar system in its projects) is a step in the right direction.

• Risks to our call are: i) weaker-than-expected property sales; ii) slower-than-expected progress billings due to Covid-19 related disruption affecting efficiency and lower-than-expected margins.

Source: AmInvest Research - 23 Feb 2022