LAGENDA: Early-Stage Project Recognition Drags Earnings Below Forecasts Despite Record Sales

Performance Review

A prominent property developer’s core earnings for the first half of 2025 (6M25) registered RM88 million, marking a 4% year-on-year decline and falling significantly below both internal and consensus full-year forecasts, achieving only 43% and 44% respectively. Despite this, revenue for the same period increased by 7% year-on-year to RM503 million, driven by robust sales momentum from ongoing projects including Lagenda La’Indera, Puncak Warisan, and Kulai.

The primary factor for the below-expectation performance was identified as a slower-than-anticipated revenue recognition from newly launched projects, which remain in their early stages of construction. This was compounded by a 2.6 percentage point decline in the EBITDA margin to 26.3%, largely attributed to increased staff costs from additional hiring supporting the group’s state expansion strategy.

However, the second quarter of 2025 (2Q25) showed signs of recovery. While 2Q25 revenue saw a 10% sequential decline due to lower recognition from projects nearing completion, the EBITDA margin expanded by 3.3 percentage points to 28%. This improvement was aided by the absence of project finalisation cost adjustments recorded in 1Q25, which helped to elevate 2Q25 core net profit to RM45 million, a 6% increase quarter-on-quarter.

Sales Momentum and Future Outlook

The group reported a record-high sales quarter in 2Q25, achieving RM413 million. This surge, representing a 64% quarter-on-quarter and 39% year-on-year increase, was largely propelled by the successful launch of Kulai Phase 1 in Johor and sustained strong sales from projects in Pahang and Selangor. Total sales for 6M25 reached RM665.4 million, keeping the company on track to meet its ambitious RM1.5 billion sales target for 2025.

Looking ahead, the company anticipates stronger sales momentum in the second half of 2025, supported by an additional RM922 million in planned launches across Pahang, Selangor, Johor, and Perak. Unbilled sales have risen 17% quarter-on-quarter to RM1 billion, providing substantial revenue visibility through 2027.

Investment Bank’s Rating and Risks

PhillipCapital, the investment bank publishing the report, maintains its HOLD rating on the stock with an unchanged RNAV-derived target price of RM1.25. The bank has revised its 2025-2026 earnings forecasts lower by 5-10% to account for a more conservative recognition ramp-up from newly launched projects, though 2027 earnings estimates were lifted by 2%. Key risks highlighted include fluctuations in raw material prices, margin pressures, and the potential for higher or lower-than-expected property sales.