Investment Highlights

• We maintain BUY on Lagenda Properties (Lagenda) with an unchanged fair value (FV) of RM1.81/share. Our FV is based on a discount rate of 30% to our RNAV (Exhibit 2), and a 3% premium to reflect its 4-star ESG rating (Exhibit 3).

• We also maintain our earnings forecast following our recent meet up with Lagenda’s management for updates. Here are the key takeaways:
  (i) To date, Lagenda launched RM370mil worth of properties in Darulaman Lagenda, which constitutes 63% to the project’s total gross development value. As a result of the overwhelming response with a high percentage of booking, Lagenda is looking to expand its presence in Kedah with the acquisition of additional land in the near term.
  (ii) Government servants form 80% of Kedah Darulaman’s buyers profile (both confirmed sales and booking). Hence, we believe that the bulk of its booking will be converted to sales because public servants have a higher sales conversion ratio of 90% as compared to 50-60% for the buyers from private sector.
  (iii) Lagenda plans to launch its Mersing township in 1HFY23. We believe that the price mismatch between house price and affordability of the B40 income group in Johor will allow the group to penetrate the Southern Region with affordable landed properties.
  (iv) The construction of its projects launched before 2022 is nearing completion with construction progresses ranges between 72-97%. Moving forwards, we believe that majority of its FY23 revenue will be contributed by Bandar Baru Setia Awan Perdana (BBSAP) 4A, Lagenda Teluk Intan (LTI) 2, LTI 3A, Lagenda Tropika Phase 1 and Kedah Darulaman Phase 1, 2.
  (v) Lagenda is partnering Inta Bina to roll out industrialised building sustem (IBS) for BBSAP 4B, LTI3A/3B and Darulaman Lagenda. This will also shorten construction time and increase efficiency, reducing labour requirements by 60- 70%.

• We continue to like Lagenda due to the company’s niche in the underserved landed affordable housing development in second-tier states with a large population of B40 and M40 income groups.

• The stock currently trades at a compelling FY24F PE of 5x vs. the industry average of 9x while FY24F dividend yields are attractive at 6%.

Source: AmInvest Research - 15 Mar 2023