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Thursday, April 16, 2015

Matrix Concepts Holdings - Bonus Issue Once Again

Matrix announced a 1-for-6 bonus issue and 1-for-6 free warrants. We maintain BUY with a higher TP of MYR3.60 (14% upside). From our recent visit to Seremban, we were impressed with the Matrix Global School development. Besides that, we also gather that new sales in 1Q15 are on track to meet management’s full-year target of MYR600m (excluding land sale).
  • Pampering shareholders again. Matrix Concepts (Matrix) proposed a 1-for-6 bonus issue and 1-for-6 free warrants yesterday. The warrants will have a tenure of five years, and the exercise price will be determined at a later date. We are positive on this as the company utilizes its retained profits efficiently to reward shareholders. The larger share base of about 544m after bonus issue should enhance the liquidity of the stock and the conversion of warrants in the future will meet the company’s funding needs especially in the event of additional landbanking.
  • Matrix Global School is impressive. We recently visited Bandar Sri Sendayan and we are impressed with the Matrix Global School development. The school currently has 345 students. Given the standard of the facilities, amenities, layout, quality of teachers and fairly reasonable school fees, we think the school will be able to attract more students going forward.
  • New property sales in 1Q15 on track to meet full year target. From our recent meeting with the managing director Dato’ Lee Tian Hock, we gather that new property sales in 1Q15 are very much on track to meet management’s full year target of MYR600m, on top of MYR100-150m industrial land sales. Land sales, however, may only come in more materially in mid-2015, due to the timing of approval by the foreign industrial players.
  • Maintain BUY with higher TP of MYR3.60. We remain upbeat with the company’s effort to repetitively reward shareholders via consistent earnings delivery, generous dividend payout and bonus issue. Sentiment will likely be lifted and in view of the enhancement of liquidity post bonus issue, we raise our TP to MYR3.60 (from MYR3.48) based on a lower 15% discount to RNAV (from 20%). Post bonus issue, our TP will be adjusted to MYR2.96 on a fully diluted basis.

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