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Monday, February 24, 2020

Matrix Concepts Holdings - Pipeline Launches to Cater to Market Demand

To recap, Matrix reported 3QFY20 core PATMI of RM65.3m (+11.2% QoQ, +34.4% YoY), bringing 9MFY20 core PATMI to RM178.6m (+17.7% YoY). Management reiterated its confidence on achieving the RM1.3bn FY20 sales target despite the potential impact of COVID-19 towards 4QFY20 sales. In terms of dividends, we expect Matrix to be able to pay over 12 sen per share for FY20 (9MFY20: 9 sen per share). We recalibrate our FY21/22 earnings downwards by -6.8%/-2.9% as our previous BSS launch assumptions were perhaps on the high side. Maintain BUY with an unchanged TP of RM2.25 based on unchanged 25% discount to RNAV of RM3.00.

We attended a small group briefing with Matrix’s management. Below are the key takeaways.

3QFY20 recap. To recap, Matrix reported 3QFY20 core PATMI of RM65.3m (+11.2% QoQ, +34.4% YoY), bringing 9MFY20 core PATMI to RM178.6m (+17.7% YoY). 3QFY20 new sales came in at RM280.9m, bringing 9MFY20 sales to RM946.5m which represents 73% of the full year target of RM1.3bn while unbilled sales remained healthy at RM1.2bn, representing a healthy cover ratio of 1.2x.

Pipeline launches. We understand that RM155.7m worth of GDV will be launched in 4QFY20, bringing the full year launch target to slightly over RM1.1bn. The remaining launches will be located in the BSS township i.e. Hijayu Residence Phase 1 (RM130m) and Tiara Sendayan Precint 8 (RM125.7m). Tentatively, FY21 is set to launch RM768.1m from the BSS township and RM138.2m from the BSI township; do note that these are preliminary targets with the product mix and GDV to be reconsidered closer to end-FY20. To cater to the current market’s appetite, Matrix will continue to focus its efforts on producing affordably priced products within its township. With regards to the high-rise projects in Klang Valley (in Puchong and Damansara Perdana), management has clarified that its launches may not take place in the immediate term due to the persisting weak market sentiments.

Foreign projects. In Australia, the soft launch of M.Greenvale took place in April 2019 has an estimated GDV of RM72m and garnered a take up rate of c.30%. The project is expected to be completed in 2021, with earnings to be recognised in FY22. 2021 will also see the launch of M.St.Kilda, a mixed development in Melbourne with an estimated GDV of RM240m.

Outlook. Management reiterated its confidence on achieving the RM1.3bn FY20 sales target despite the potential impact of COVID-19 towards 4QFY20 sales. In terms of dividends, we expect Matrix to be able to pay over 12 sen per share for FY20 (9MFY20: 9 sen per share)

Forecast. We take this opportunity to recalibrate our FY21/22 earnings downwards by -6.8%/-2.9% as our previous BSS launch assumptions were perhaps on the high side. Maintain BUY with an unchanged TP of RM2.25 based on unchanged 25% discount to RNAV of RM3.00. We continue to like Matrix as it is well-positioned to ride on affordable housing theme within its successful townships with cheap land cost and sustained property sales. This is supported by an attractive dividend yield of 6.6% for FY20 and 7.4% for FY21, being one of the highest in the sector.

Source: Hong Leong Investment Bank Research - 24 Feb 2020

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