What’s New

In-line 2QFY18 performance. L&G reported a 2QFY18 net profit of RM25.4m which was largely lifted by RM35.5m write-back of cost arising from the Damansara Foresta project that was handed over last year. On a core earnings basis, a net loss of RM10.2m was recorded in 2QFY18. Nevertheless, we expect a much stronger performance in 2HFY18 as its Astoria project will start to contribute meaningfully following the completion of the podium of the project.

Higher revenue in 2QFY18. L&G’s 2QFY18 revenue came in at RM22.8m, which represents a surge of 95% q-o-q and 45% y-o-y. This is also highest quarterly revenue since 4QFY16 as Astoria was only launched in mid-CY16. Property development accounted for 70% of 2QFY18 revenue while its education business contributed 16%.

More launches in the near term. After an absence of more than a year since its last launch of Astoria phase 1, L&G is set to launch the second phase of Damansara Foresta called Damansara Seresta (RM480m GDV) and also its first township development in recent years with Sena Parc phase 1 (RM230m GDV) in Senawang where the former Tuanku Jaafar Golf and Country Club is located. A strong sales performance from both projects could help deliver impressive earnings growth given its small earnings base.

Maintain Buy. We reiterate our BUY recommendation with a TP of RM0.28, based on a 65% discount to our RNAV. It is trading at an unjustifiably steep discount of 73% to its RNAV, thus giving a decent dividend yield of 4.5%. With a net cash position of RM218m (representing ~35% of its market cap), L&G is set to unlock its deep land value via more launches.

Source: Alliance Research - 21 Nov 2017