Analysts favours Lagenda’s focus on affordable housing

Lagenda Properties Bhd’s (Lagenda) exposure to affordable housing segment garnered favourable views from analysts as they believe the segment is in high demand but underserved.

Notwithstanding the nationwide glut of overhang residential units, the research team at Hong Leong Investment Bank Bhd (HLIB Research) believe there remains a strong demand for the underserved affordable housing segment (in the third quarter of 2020 residential transactions show 62.2 per cent are priced less than RM300,000).

“Most of Lagenda’s clientele are from the public sector (civil servants, police, army), which are able to get LPPSA financing (100 per cent financing up to RM200,000 with minimum monthly income of RM1,700), ensuing a high booking conversion rate (more than 90 per cent) for Lagenda’s properties.

“With low retrenchment probability within the public sector, we believe Lagenda’s products are more resilient to the economic ebb and flows.”

It noted that Lagenda’s primary focus is to build affordable houses with sales price of less than or circa RM200,000 to cater the B40 and M40 income group.

It also pointed out that Lagenda currently has two flagship developments, notably, Bandar Baru Setia Awan Perdana (BBSAP) in Sitiawan and Lagenda Teluk Intan (LTI) in Teluk Intan, Perak.

“The company has a total landbank of over 2,274 acres with a total remaining gross development value (GDV) of RM4.1 billion to be developed for the next five years.

“Judging from the pace of recent acquisitions and developments, we believe there is more to come from the company with its aspiration to grow.

“Lagenda aims to launch one new township annually with target launches including 2021 in Tapah and 2022 in Sungai Petani.

“Concurrently, Lagenda is looking at launching new phases of current township in Sitiawan & Teluk Intan,” HLIB Research said.

While Lagenda’s products are priced affordably at below RM200,000, the research team highlighted that it is able to derive a 20 to 30 per cent profit after tax (PAT) margin as compared to five to 15 per cent from other peers in affordable market range.

“We believe this high margin is sustainable (20.2 per cent of PAT margin achieved in FY20) driven by Lagenda’s ability to acquire sizeable lands at cost of circa RM2 to RM3 per square feet, which is only five to six per cent per cent of GDV,” it opined.

It estimated that its FY21 to FY23 should register a profit of RM219.3 million (up 55.7 per cent y-o-y), RM264.6 million (up 20.6 y-o-y) and RM319.6 million (up 20.8 per cent y-o-y) supported by new sales of circa RM1 billion per year and unbilled sales of RM502 million (which should provide earnings visibility for at least two to three quarters).

“Current bookings remain encouraging with RM280.6 million registered as of midMarch 2021. Lagenda aims to launch one township annually with capacity to build 6,000 to 8,000 units of houses.

“Each township should translate into RM1 billion to RM1.5 billion GDV each year,” it said.