Lagenda reported 1Q21 core PATMI of RM55.6m (+19.5% QoQ, +1174.9% YoY). The results were within our and consensus expectation accounting for 25% of both forecasts. Overall, sales were higher by 182% YoY attributable to more launches. We are expecting a stable contribution from the company backed by its robust take-up rates on the affordable landed market. Maintain our forecast and BUY recommendation with unchanged TP of RM2.01 based on 20% discount on estimated RNAV of RM2.52 per share. We like Lagenda for its exposure to the underserved affordable housing segment, stable clientele base (public sector workers with government financing access), low land cost, high booking conversion rate and superior margins.

Within expectations. Lagenda recorded 1Q21 core PATMI of RM55.6m (+19.5% QoQ, +1174.9% YoY). The results were within our and consensus expectation accounting for 25% of both our and consensus full year forecast.

QoQ. Top-line decreased by 16.1% mainly due to one-off consolidation adjustments in 4Q20 arising from the acquisitions of operating subsidiaries as part of the asset injection exercise. However, revenue for property development was higher by 27.1% attributable to higher sales and progressive billings. Core PATMI was higher by 19.5% mainly driven by the decrease in other expenses (-30.6%) as well as the absence of minority interest in 1Q21 vs RM9.2m in 4Q20. In turn, core PATMI margin was higher by 7.2ppts reflecting efficient and scalable business model.

YoY. Higher revenue by >100% was attributable revenue recognition from the asset injection of Blossom Eastland, Rantau Urusan and Yik Wang Trading (part of their restructuring exercise into property development), which in turn increased the core PATMI by >100%.

Sales and launches. c.RM250m of sales was achieved in 1Q21, representing c.25% of their full year target of RM1bn. c.70% of 1Q21 sales are from the Bandar Baru Setiawan Perdana (BBSAP) township (Phase 2D and 3A) and the remainder from Phase 2 Lagenda Teluk Intan (LTI). Unbilled sales stood at RM515m as of 1Q21, representing a cover ratio of 1.0x. Management is targeting to launch a new township in Tapah with a GDV worth RM360m comprising 2.4k units for this year while the rest at its existing township in LTI and BBSAP.

Outlook. Encouragingly, management notes that sales momentum remains positive for the month of April and May despite the return of MCO. We are expecting a stable contribution backed by its robust take-up rates on the affordable landed market.

Forecast. Unchanged.

Maintain BUY; TP: RM2.01. We maintain our BUY recommendation with unchanged TP of RM2.01 based on 20% discount on estimated RNAV of RM2.52 per share. We like Lagenda for its exposure to the underserved affordable housing segment, stable clientele base (public sector workers with government financing access), low land cost, high booking conversion rate and superior margins.

Source: Hong Leong Investment Bank Research - 27 May 2021