Lagenda Properties Berhad - Earnings Growth Anchored by New Launches
Tue, 20-Aug-2024 07:16 am
by Research Team • Apex Research

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LAGENDA (7179)

Target Price (RM)

1.71

Recommendation

Buy

Summary

  • LAGENDA’s 2QFY24 core net profit rose +45.8% yoy and +13.3% qoq to RM48.4m, bringing 1HFY24 core net profit to RM91.1m, which deemed in-line at 44.6% ours and 45.0% consensus expectations.

  • Kept our earnings forecast unchanged and introduced FY26F core net profit at RM277.4m (+13.4% yoy) as billings pick up from launches in Perak, Pahang, Johor and Selangor.

  • Upgrade our recommendation to BUY with higher TP of RM1.71, based on revised 30% discount to RNAV to reflect the brighter sentiment in property industry landscape alongside with LAGENDA’s decent growth prospects.

     

Results Review

  • Results review. 2QFY24 core net profit rose +45.8% yoy and +13.3% qoq to RM48.4m, driven by stronger billings in construction activities in several newly launched property development projects. Revenue for the quarter added +25.2% yoy and +9.0% yoy to RM245.8m.

  • Results deemed in line. Core net profit in 1HFY24 at RM91.1m (+25.6% yoy) was at 44.6% of our core net profit forecast at RM204.4m and was at 45.0% of consensus forecasted net profit of RM202.3m. We reckon subsequent quarters earnings will see further improvement as construction billings gather pace in several newly launched projects.

  • Operations Highlights. In 2QFY24, LAGENDA raked in single-quarter record high new sales of RM297.1m, representing an uptick against RM222.6m in the previous corresponding quarter. This is supported by the launch of four projects totaling c.2,600 units with collective GDV of RM829.0m (1QFY24 on new launch with GDV only at c.RM127.0m). Unbilled sales stood at RM743.5m (from RM751.9m in 1QFY24) alongside with bookings of RM542.7m will sustain revenue visibility for the next 12-18 months.

  • Industry Highlights. Residential property market remains stable with loan applications continues to improve, while overhang units are gradually clearing up. Additionally, salary hike for civil servants effective 1 December 2024 is expected to boost demand for affordable housing projects, which plays well into LAGENDA’s forte in affordable housing market with average selling price of cRM250,000/unit of single store terrace house.

  • Outlook. Going into 2HFY24, the Group aims to launch c.4,800 units of affordable homes with an estimated GDV of RM1.17bn. LAGENDA will be equipped with balance landbank of c.5,200-ac spread across Peninsular Malaysia with a potential combined GDV of RM14.49bn which will sustain developments over the next 8-10 years.

  • Valuation. With the reported earnings coming within expectations, we kept our earnings forecast unchanged and we introduced FY26F core net profit at RM277.4m (+13.4% yoy) as billings pick up from launches in Perak, Pahang, Johor and Selangor. Consequently, we upgrade our recommendation on LAGENDA to BUY with a higher target price of RM1.71, based on 30% discount rate to RNAV. The revision of discount rate is to reflect the brighter sentiment in property industry landscape alongside with LAGENDA’s decent growth prospects.

  • Risk. Inability to replenish landbank, rising construction costs beyond expectations, and changes in housing as well as property regulations.

     

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