Lagenda Properties' net profit falls 34% on lower property development contribution, higher finance costs

• “Lagenda has a proven track record of delivering landed affordable housing with lifestyle facilities and our key projects have recorded take-up rates of above 90%."

KUALA LUMPUR (Aug 22): Lagenda Properties Bhd’s net profit fell 34.13% to RM33.19 million in the second quarter ended June 30, 2023 (2QFY2023), from RM50.38 million a year ago, amid lower contribution from its property development segment due to the lower progress percentage of completion contributed from the current projects.

Profit before tax of its property development segment dropped 47.9% to RM37 million in 2QFY2023, from RM71.07 million a year ago as revenue for the segment fell 31.4% to RM159.98 million, from RM233.08 million previously. 

The quarterly net profit was also hit by higher finance costs of RM5.34 million, a sharp increase of 72.53% over RM3.11 million recorded a year ago, its bourse filing showed on Monday (Aug 21).  

Earnings per share decreased to 3.96 sen in 2QFY2023, from 6.03 sen a year ago.

In line with the weaker net profit, revenue for the quarter dropped 24.04% to RM196.38 million, from RM258.55 million previously.

Despite posting weaker quarterly performance, the group declared an interim dividend of three sen per share — maintaining its three sen per share dividend payout in the same period of last year — payable on Sept 25, 2023.

For the cumulative six months of FY2023, its net profit shrank 25.53% to RM72.52 million, from RM97.39 million, as revenue declined 16.39% to RM377.34 million, from RM451.3 million.

“During the first half of the year, we were transitioning from traditional construction methods to industrialised building systems (IBS) for our newer projects in Teluk Intan and Kedah. This led to a temporarily slower construction pace which was expected as we were getting used to the new IBS system. Owing to this, revenue recognition was lower in comparison to the previous financial year. However, we are now moving towards full implementation of IBS in these projects, and we expect to see an acceleration in construction speed,” said its managing director Datuk Jimmy Doh in a statement.  

Lagenda Properties noted that demand for its homes continued on a strong trajectory in 2QFY2023 following it recorded confirmed sales of RM507 million in the first half of the year (1HFY2023), surpassing last year’s achievement by 42%, driven by Darulaman Lagenda in Kedah.

Its revenue and earnings visibility is further underscored by unbilled sales amounting to RM811.2 million as at June 30, 2023, while bookings of RM347.6 million provide a solid pipeline for future sales.

On top of that, Doh said with construction activities gaining momentum, the group will see faster conversion of sales into revenue and profits in the coming quarters.

Meanwhile, he said there is still a significant shortage of affordable housing across most states and demand will remain robust in the foreseeable future.

“Lagenda has a proven track record of delivering landed affordable housing with lifestyle facilities and our key projects have recorded take-up rates of above 90%. This re-affirms that we are attuned to the market's preferences and needs,” he added.

The group is confident in its positioning and ability to grow to deliver value over the long term.

“Our sizable vacant land bank of almost 4,700 acres across five states with an estimated remaining GDV [gross development value] of above RM12 billion provides us with a solid foundation for future growth. We also have a strong balance sheet with low net gearing of 0.05 times, giving us the financial flexibility to pursue strategic initiatives to widen our footprint,” he concluded.

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