PETALING JAYA: There is a bright spot amidst a multi-year slump in the local property market, which is the affordable segment that caters to owner-occupier house buyers versus property investors or speculators, said AmInvestment Bank Research.
The research house, which has initiated coverage on Lagenda Properties Bhd, said the growing population, coupled with the structural change in Malaysian households over the years, will continue to fuel rising demand for housing.
It said Lagenda’s business model of low-cost affordable housing is mainly catered towards first-time home buyers who view a house as a basic necessity, rather than a big-ticket item for upgrading or investment purposes.
“While we note that the property sector is going through a major downcycle due to a supply overhang (mainly from high-rise residential spaces which made up 53.2% in the first half of 2020), we highlight that the low-cost affordable housing niche has an inelastic demand.
“Hence, Lagenda is able to sustain sales even during the slowdown in the property sector.
“From our findings, there are only 90,000 to 100,000 units of affordable housing below RM200,000 available as compared to a demand of 130,000 units of affordable housing annually, ” it said in a report.
The financial year 2020 (FY20) marked a new chapter for the group following the disposal of all its stakes in the poultry division.
Lagenda registered a sharp jump in profits post-asset injection of the property development arm in mid-July 2020, recording profits of RM49.8mil and RM46.5mil in the third and fourth quarters respectively last year.
Cumulatively in FY20, the group raked in a net profit of RM140.9mil as compared to RM9.8mil in FY19.
“We expect Lagenda to post outstanding growth in both revenue and profit, with FY20–FY23 compound annual growth rates (CAGR) of 17% and 24%, respectively, on a conservative basis, ” the research house said.
AmInvestment Bank has a “buy” call on Lagenda with a fair value of RM1.95 per share, based on a 20% discount to its revalued net asset value.
This was to take into account Lagenda’s strong management team as reflected in its ability to consistently acquire land at a steep discount to the going rates and its ability to sell its houses quicker than peers, translating to lower risk for the company as the group will be able to monetise their products more efficiently.
It added that Lagenda has a dividend policy ranging from 25% to 35% and assuming a dividend payout ratio of 30% of its net profits annually, this translates to a dividend per share of 6 sen, implying a decent yield of 3.6% to 4.5% for FY21-FY22.
Lagenda is a Perak-based property developer that focuses on low-cost/affordable housing in self-sustaining townships.
With a price range of RM150,000 to RM200,000 a unit, the properties are targeted at the B40 and M40 income groups.
“Lagenda’s townships have a niche market, that is civil servants (who make up close to 80% of all buyers) with stable incomes/strong job security that are less susceptible to economic cycles.
“The high civil servant population in these locations is attributed to the presence of the home base of the Royal Malaysian Navy and various other government institutions and public/private universities in their vicinity, ” the research house said.
Currently, the group has two major affordable township projects – Bandar Baru Setia Awan Perdana in Sitiawan and Lagenda Teluk Intan – both in Perak, spanning over 809.37ha that can accommodate some 20,000 affordable homes.