Market sentiment on Bursa Malaysia has been improving of late, with two particular sectors standing out in the crowd. Among the stocks that have seen tremendous interest are those in the property and solar sector. The property index is up 25% YTD and is trading at a new 52 week high at time of writing. Stocks like UEMS has seen its stock going up over 100% while Sime Property and E&O, is up 40% and 50% respetively in the last two months alone. Participation has been wide across the board including the mid and small caps.

Yet one property stock that is little known and lagging in this property bull market is Lagenda Properties Bhd (Lagenda).

BACKGROUND

Lagenda is a Perak-based company listed on Bursa Malaysia Main Board via a back door listing of DBE Gurney Resources Bhd in 2020. Following the emergence of the Doh family as new major shareholders, the previous owners have retained the poultry business and Lagenda has since been complately transformed into a property developer specializing in the affordable housing segment.

Starting with their highly profitable business model in Perak, Lagenda has been expanding into other states with aquisition of landbanks in Kedah, Pahang, Selangor and Johor. Notable projects include Bandar Baru Setia Awan Perdana in Sitiawan, Lagenda Teluk Intan and Darulaman Lagenda.

PRICE CHART

Lagenda stock price has been trading in a very narrow range this year with a low of RM1.16 and a high of RM1.32. It has formed a very strong base and support at the RM1.16 level and is poised to retest and potentially break the downtrend line (currently sitting at RM1.24) that has been in placed from November 2021. If the pivot point of RM1.24 can be broken, we could potentially test chart resistance levels at RM1.32 and RM1.50.

WHY LAGENDA STOCK WILL PERFORM WELL IN THE NEAR TERM

1) BIG LAGGARD AND UNDEMANDING VALUATIONS

While most property stocks having moved up significantly in recent months, Lagenda has been lagging behind with valuations that could possibly make it one of the cheapest stocks in the sector! It currently trades at a trailing PE of 6X with a FY24 PE of 4X (according to Aminvest Research) with dividend yield at 6%. It is  also trading below its NTA of RM1.26.

2) NICHE MARKET

Being a niche player in the the underserved affordable housing segment has enabled the company to achieve impressive margins of about 16%. Also interesting to note is, Lagenda’s housing prices have been increasing steadily over the last few years, meaning their profitablity still has upside on the increment in housing prices. Many developers profitabilty has been reduced in recent times from the offer of discounts and rebate schemes. 

3) BEING IN THE RIGHT PLACE AT THE RIGHT TIME

With the current positive sentiment in property stocks, investors will definitely be on the lookout for stocks that are yet to move and that makes Lagenda a very good and easy trade setup in the right sector. Compared to the above mentioned property stocks, Lagenda is only up 2% YTD.

4) CONCENTRATED SHAREHOLDING

With the Doh family controlling about 74% of the shares in Lagenda. the small remaining free float could potentially be a  very powerful catalyst for a quick move up in the share price should the company see a positive rerating by shareholders in the near future.

5) INCLUSION INTO THE FTSE4GOOD BURSA INDEX

Lagenda was included in the FTSE4GOOD Bursa Index in June, in recognition of its ESG 4star rating as well as its endeavour to create positive and sustainable impacts within its organization and communities. Inclusion in this index gives Lagenda greater access to foreign funds who have ESG mandates for investing.

CONCLUSION

At the current price Lagenda offers a very compelling risk-to-reward proposition. It deserves a rerating based on the its strong fundamentals and attractive valuations as well as a premium for being a niche player in the affordable housing segment.

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments.