LAGENDA Properties Bhd’s move to buy freehold agricultural land measuring 431 acres (174.42ha) in Mersing, Johor, for RM45.1 million cash from UEM Sunrise Bhd’s wholly owned subsidiary Sunrise Mersing Sdn Bhd, will help expand its landbank, according to AmInvestment Bank Bhd which is positive on the deal.

“We are positive about the latest development. The new acquisition will increase Lagenda Properties’ GDV by 13% to RM6.1 billion. Lagenda Property plans to launch its sixth township on the land,” its analyst Jeremy Yap wrote.

Located near established townships of Taman Mersing and Taman Wawasan Indah and Plaza D’Jeti, the land is earmarked for a self-contained affordable township development with a GDV of RM985 million over five years, the research outfit said in a report yesterday.

“At about RM2.40 per sq ft (psf), the price tag appears to be consistent with the asking price range of between RM3 and RM6.50 psf for land parcels up for sale in the same area based on our research (asking prices are generally higher than actual transacted prices),” he added.

AmInvestment maintained its ‘Buy’ call on Lagenda Properties but raised its fair value by 5% to RM1.94 a share (from RM1.84/ share) based on a 20% discount to its revalued net asset value (RNAV) after reflecting the enhancement from the latest land acquisition and including a 3% premium to reflect its 4-star ESG rating.

“This compares to about a 40% discount to RNAV the market generally accords to affordable property developers of a similar size to take into account Lagenda Properties’ defensive customer profile of public servants who are less susceptible to economic cycles and a strong management team,” he added.

Yap expects Lagenda Properties to generate stable profits in the coming quarters driven by progress billings from unbilled sales (that stood at RM515 million as at end-March 2021); and RM1.1 billion new launches in FY21F, comprising 6,300 units of affordable housing units (with an average selling price of c.RM175,000/unit) in Sitiawan (Bandar Baru Setia Awan Perdana), Teluk Intan (Lagenda Teluk Intan) and Tapah (third township), all in Perak.

“We continue to like Lagenda Properties as it offers a good proxy to the resilient affordable housing segment, a defensive public servant customer profile and a highly business savvy management team,” he wrote.

Public Investment Bank Bhd (PublicInvest), in a note yesterday, stated the disposal is part of the land owned by UEM Sunrise previously and identified as a non-core asset as there is no immediate development planned for the asset.

The investment bank’s earnings estimates for the developer are kept unchanged for now, pending more clarity from UEM Sunrise’s management.

PublicInvest kept an unchanged TP of 55 sen on UEM Sunrise, pegged at 75% discount to its RNAV.

Its analyst Tan Siang Hing added UEM Sunrise’s move was consistent with the group’s strategy to dispose of non-core assets and to focus on landbank with faster turnaround especially in the central region.

“The freehold land is currently still undeveloped with agricultural land status. We understand the proposed land disposal is expected to be completed within 10 months from the date of the sale and purchase agreements. No information has been disclosed on the book value and projected land sale profit as yet,” he added.