KUALA LUMPUR (May 9): UOB KayHian has initiated coverage on Lagenda Properties Bhd (KL: LAGENDA) with a “buy” rating at RM1.49 and target price (TP) of RM2.05.

In a note on Wednesday, the research house said the company’s profitability exceeds industry norms due to its low land costs and efficient construction methods.

UOB KayHian forecasts a three-year earnings compound annual growth rate (CAGR) of 28% to 2026, supported by 15% annual sales growth driven by more launches worth RM1.9 billion-RM2.4 billion, as well as accelerated progressive billings.

UOB KayHian said that based on 2023 National Property Information Centre data, 53% of residential transactions in Malaysia involved houses priced at less than RM300,000, with Perak, Selangor, Johor, Kedah and Pahang being the key contributors.

It said that by focusing on low-cost housing tailored for first-time genuine buyers, Lagenda’s projects have historically achieved a remarkable take-up rate of more than 95% within the first year of launch.

“With a huge proportion of buyers being public sector employees (who can tap government financing schemes), Lagenda’s business model is resilient to economic fluctuations, highlighting the company's profitable and sustainable approach to affordable housing.

“Lagenda proactively expands its presence nationwide to address the affordability challenge, starting from Perak and extending to Kedah, Pahang, Selangor and Johor.

“Its largest land bank exposure is in Johor, where it is opportunely placed to capitalise on the state's growth, fuelled by economic incentives and infrastructure projects such as the rapid transit system. Lagenda’s total remaining land bank of 4,689 acres has a GDV (gross development value) of RM13 billion,” it said.