Investment Highlights

• We maintain our BUY call and earnings forecasts for Lagenda Properties with an unchanged fair value (FV) of RM1.90. Our FV is based on a 20% discount to its RNAV (Exhibit 1), and after including a 3% premium to reflect its 4-star ESG rating (Exhibit 2).

• Here are some highlights from yesterday’s briefing: 1. Lagenda Properties achieved strong sales and bookings of RM1.41 billion in FY21. Out of these, RM757mil was confirmed sales with booking at RM649mil. It sold 3,506 units of houses and received bookings for 2,932 units. 2. The company plans to launch 6,000 units of affordable home with total gross development value (GDV) of RM1.0bil. The affordable homes will be built in Perak (Teluk Intan, Tapah, Bandar Baru Setia Awan Perdana), Kedah (Sungai Petani) and Johor (Mersing). 3. Key near-term challenges are converting the bookings into sales due to economic challenges faced by the B40 and low M40 potential buyers. 4. In order to manage rising raw material prices, we think the company may pass on the cost increase by raising its selling prices slightly by 1%–3%. Hence, the margin impact should be minimal. 5. The company has started a partnership with Sim Leisure Group. This is aimed at improving the clubhouse facilities in its housing projects.

• We continue to like Lagenda Properties due to: i) its expected earnings growth of 30% in FY22 backed by unbilled sales and good sales prospect; ii) 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; and iii) its focus on ESG (via installation of PV solar system in the home that it build) is a step in the right direction.

• Risks to our call are weaker than expected property sales and margins.

Source: AmInvest Research - 25 Feb 2022