KUALA LUMPUR (Jan 26): Apex Research has downgraded Lagenda Properties Bhd to “hold”, with an unchanged target price of RM1.43, since its share price has appreciated in recent months.

In a note on Friday, the research house said it is optimistic about the 50:50 joint venture (JV) of Lagenda Properties with Sime Darby Property Bhd (SimeProp) for the establishment of Seed Homes Lagenda, aiming to deliver innovative solutions in the affordable homes segment.

Apex stated that Lagenda Properties will leverage SimeProp’s position as one of the largest property players in Malaysia, while Lagenda Properties will offer its expertise in affordable housing township development.

The research house said Seed Homes Lagenda had acquired 249 acres of land from SimeProp in Gurun, Kedah, for an estimated cost of RM50 million, to embark on SimeProp's first affordable township project, offering over 3,000 single-storey terraced houses.

Apex believes this development is strategically positioned to benefit from the area's potential industrial expansion.

Set to launch in late financial year ending Dec 31, 2024 (FY2024) or early FY2025, this project will offer an estimated gross development value of RM750 million to RM850 million, the research house said.

“We believe this JV project could significantly contribute to Lagenda Properties' revenue growth in the next financial year. With an estimated selling price of between RM250,000 and RM300,000 [per unit], we reckon this move is deem fit to strengthen the group's presence beyond Perak.

“Margin-wise, we expect the project to generate gross margins of approximately 35% to 40%, which is deem similar to historical completed projects,” Apex added.

Besides, it does not discount a potential rerating on the cards, as it has yet to pencil in the latest development, pending further details in the next quarter’s results briefing.

The research house also highlighted the risks to its call, including the inability to replenish land bank, an unexpected further rise in construction costs, and changes in housing as well as property regulations.

At the time of writing on Friday, Lagenda Properties was trading down three sen or 2.03% at RM1.45 per share, translating into a market capitalisation of RM1.21 billion.

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