Investment Highlights

• We maintain BUY on Lagenda Properties (Lagenda) with a higher fair value (FV) of RM1.82/share from RM1.79/share previously after taking into account a new project called Bernam Jaya township into our RNAV calculations (Exhibit 3). Our FV reflects a 3% premium for a 4-star ESG rating (Exhibit 4).

• While maintaining our FY22F/FY23F earnings, we raise FY24F core net profit by 4% to factor in contributions from the new project. Our RNAV and earnings estimates are conservative assumptions pending further clarity from the management on the project details and JV structure.

• Lagenda entered into a development joint venture with Kumpulan Hartanah Selangor (KHSB), wholly-owned by the Selangor state government, to develop a 191-acre residential land located in Bernam Jaya, Selangor.

• Lagenda plans to develop an affordable township on the land with over 2,000 units of affordable landed homes priced below RM250K. We anticipate the property mix to be similar to its existing townships in Perak, with a majority made up of single-storey houses.

• Pending further details, we expect that the Bernam Jaya project could have an estimated gross development value (GDV) of RM500mil. It could potentially contribute up to 6% of Lagenda’s earnings from FY24F to FY28F with the township scheduled to be launched in 4QFY23.

• As the landowner, KHSB is entitled to a development rights payment amounting to RM42mil. It will be paid out proportionately during the course of the 5-year of development (FY24 to FY28).

• The land is situated in Mukim Kuala Kalumpang, Bernam Jaya, Selangor (Exhibit 1). It is only 7km from the Selangor-Perak border and 75km from the Kuala Lumpur city centre. It is also easily accessible via the North-South Expressway.

• We are optimistic on Lagenda’s new venture in Selangor given its sizable population and limited supply of affordable landed homes in the state.

• Overall, we are positive on the acquisition as it will help sustain Lagenda’s property earnings over the medium term. The stock currently trades at a compelling FY23F PE of 4x vs. the industry average of 9x while FY23F dividend yield is attractive at 7%.

Source: AmInvest Research - 7 Sept 2022