THE MALAYSIAN RESERVE. 17TH NOVEMBER: LAGENDA Properties Bhd is expected to post a stronger fourth quarter (4Q) on higher progressive billings recognition, according to Hong Leong Investment Bank Bhd (HLIB).
HLIB’s analyst Nazira Abdullah said the pick-up in construction activities will help the developer, as the sector is currently operating at full capacity under strict standard operating procedures to catch-up on construction progress.
HLIB has maintained its ‘Buy’ call on Lagenda Properties with an unchanged target price of RM2.01 based on 20% discount on estimated revised net asset value of RM2.51 per share.
“We like Lagenda Properties 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,” Nazira wrote in a note yesterday.
For the 3Q ended Sept 30, 2021, Lagenda’s net profit fell 8.58% to RM45.54 million from RM49.81 million a year earlier, mainly in the absence of inter-group adjustment arising from acquisitions that were recorded previously.
The group also recorded lower construction profit as the segment’s revenue declined because the Movement Control Order impacted operations, according to the developer’s filing to Bursa Malaysia.
Lagenda Properties’ quarterly revenue declined 4.89% to RM185.22 million from RM194.74 million, in the absence of the inter-group adjustment and weaker construction revenue, offset by higher property development, while the trading division’s revenue rose.
The group’s property development profit rose for the quarter attributed to the acquisition of a subsidiary, Maxitanah Sdn Bhd.
For the nine-month period ended June 30, 2021 (9M21), Lagenda Properties’ net profit climbed 52.57% to RM144.04 million from RM94.4 million in 9M20.
Revenue for the nine-month increased 37.98% to RM584.44 million from RM423.56 million previously.
Nazira noted that Lagenda Properties’ earnings accounted for 66% of the research house’s and consensus expectations.
HLIB did not make any changes for Lagenda Properties’ earnings forecast, as Nazira expects a stable showing from Lagenda Properties backed by the robust take-up rates in the affordable landed market.
“The latest government measure on the 12th Malaysia Plan focusing to build more affordable houses and ease the access of financing should bode well with Lagenda Properties’ business model,” she noted.
At the end of September, Lagenda Properties had a total confirmed sales of RM496 million, with additional total bookings of RM684 million.
Unbilled sales stood at RM591 million, which the group said provides strong cashflow visibility.
Nazira said the group had achieved RM1.2 billion of confirmed sales and booking in 9M21, where the sales mostly came from the Bandar Baru Setiawan Perdana township.
With a historical conversion rate of over 90%, she believes Lagenda Properties is on track to achieve (or even exceed) its sales target of RM1 billion this year.
Lagenda Properties had stated that the group is confident of achieving its RM1 billion sales target by year end, “barring unforeseen delays and with its historical bookings conversion rate of above 90%”.
The developer said it will continue to seek suitable and potential land banks to further expand its property development business in the affordable housing segment across the nation.