Lagenda recorded FY21 core PATMI of RM200.5m (+42.3 % YoY) thanks to higher progressive billings and sales of affordable homes. We are expecting a stronger FY22 backed by robust take-up rates on the affordable landed market coupled with higher launches from management. We maintain our forecast and BUY recommendation with an unchanged TP of RM2.00 based on 20% discount on estimated RNAV of RM2.50 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 4Q21 core PATMI of RM56.5m (+24% QoQ, +21.4% YoY), which brought FY21 core PATMI to RM200.5m (+42.3% YoY), accounting for 100% of our and 95% of consensus expectation.

Dividend. Declared second interim single-tier dividend of 3.5 sen per share going ex on 24 Mar 2022, bringing FY21 dividend to 6.5 sen per share (representing a payout ratio of 27%).

QoQ. Top-line rose by 35.6% owing to higher contribution from property development segment from the higher progressive billings recognition coupled with stronger sales achieved for the affordable homes. In turn, core PATMI also increased by 24% in tandem with higher revenue.

YoY. Lower revenue by 7.9% was attributable to lower progressive billings as one of the project stage reached its tail end. Nonetheless, core PATMI showed an increase of 21.4% from the lower minority interest during current quarter coupled with lower COGS (-10.4%) as well as lower tax expense (-15.6%).

YTD. Top-line increased by 20% thanks to higher progressive billings recognition coupled with stronger sales achieved for the affordable housing. Nonetheless, core PATMI increased by 42.3% from lower minority interest during the period.

Sales and booking. Total confirmed sales were RM757m with additional total bookings of RM649m were achieved in FY21, where the sales mostly came from the Bandar Baru Setiawan Perdana (BBSAP) township. Unbilled sales increased to RM604m (from RM591m in 3Q21), representing a cover ratio of 0.9x.

Outlook. Lagenda is on a growth trajectory and will be rolling-out townships in Kedah and Johor besides its home turf in Perak. The company is planning to launch nearly 6k units in 2022 with estimated GDV of RM1-1.2bn. We are expecting a stronger FY22 backed by robust take-up rates on the affordable landed market coupled with higher launches from management. The latest government measure on 12MP focusing to build more affordable house and ease the access of financing should bode well for Lagenda’s business model.

Forecast. Maintain

Maintain BUY; TP: RM2.00. We maintain our BUY recommendation with an unchanged TP of RM2.00 based on 20% discount on estimated RNAV of RM2.50 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 - 23 Feb 2022