PETALING JAYA: AmInvestment Bank Research (AmBank Research) has upped its fair value target price for Lagenda Properties Bhd
to RM1.85 per share while sticking with its “buy” call following a contract win from the latter’s unit Opti Vega Sdn Bhd.
In a research report yesterday, the research house revealed that Opti Vega has entered into an RM85mil development rights agreement (DRA) with Intact Corporate Approach Sdn Bhd, involving the development of four parcels of land and 164 lots of adjoining vacant lands measuring 112 acres in Kota Tinggi, Johor.
With the latest DRA, the research house has increased its forecast net earnings for Lagenda by 2% and 4% respectively for the financial years ending December 2024 and 2025 in line with its target price hike for the stock from RM1.79.
It is estimating the gross development value (GDV) of the Kota Tinggi land to be RM576mil and the project will be developed over three to four years.
“Based on the preliminary development plan, the Kota Tinggi land is slated for a mixed development with a proposed GDV allocation of 70% for landed residential and 30% for commercial units,” it said.
AmBank Research said the residential component would be made up of 1,200 units of double-storey terrace houses with an indicative built-up area of 20’x70’, with an initial selling price of RM330,000 to RM350,000 per unit.
Meanwhile, it said the commercial component consists of 300 double-storey shop offices with a built-up area of 2,500 sq ft and prices ranging from RM500,000 to RM600,000.
Expecting the proposed DRA to be completed in the the second quarter, the research house said: “Assuming the cost for development right to be the land cost, the land price translates to RM17.50 per sq ft and implies a land cost-to-GDV ratio of 15%.”
This price is reasonably justifiable given that certain parcels of the land have development and building plans in place, according to the research house.
Lagenda will likely be able to initiate project launches and sales within a short period estimated to be within six months from the execution of the DRA.
The research house said Lagenda is planning to launch 50% of the GDV for the Kota Tinggi project in the middle of 2024, with the remaining 50% scheduled within the next six to 12 months after the launch of the first phase.
Comparing profitability numbers, AmBank Research said gross margin for Kota Tinggi project is expected to be in the range of 25% to 30%, which is comparatively lower than the 35% to 40% range observed in Lagenda’s existing mature projects in Sitiawan and Teluk Intan, Perak.
