Matrix on track to achieve sales target

Matrix Concepts Holdings Bhd (Nov 16, RM2.48)

Maintain buy with a lower target price (TP) of RM2.89: Matrix Concepts Holdings Bhd’s profit after tax and minority interests (Patmi) for the second quarter ended Sept 30, 2016 (2QFY17) surged by 50% year-on-year (y-o-y), bringing its first half ended Sept 30, 2016 (1HFY17) earnings to RM98.4 million, accounting for 40% of our and consensus full-year earnings forecasts. Matrix has also declared a second interim dividend of 3.25 sen per share, bringing 1HFY17 dividend per share to 6.5 sen per share, representing about 37% payout, in line with our assumption. Its 50% increase in y-o-y Patmi was the result of higher billings of ongoing projects, coupled with industrial land sales of RM18.9 million. Quarter-on-quarter, despite revenue increasing by 15%, Patmi fell by 10% due to a lower margin of the project mix as the company launched more affordably priced projects.

Sales momentum was sustained in 2QFY17 with new sales reaching RM250 million (1QFY17: RM256 million), bringing 1HFY17 total sales to RM506 million or 50% of the full-year sales target of RM1 billion (versus our conservative estimate of RM800 million). We expect Matrix to be able to sustain its sales given its focus on the affordable mass market with a pricing range of below RM600,000.

We understand the company has sold two pieces of industrial land. Matrix’s total industrial land sales in 1HFY17 amounted to RM31 million versus its full-year target of RM50 million. Matrix launched RM270 million worth of projects in 2QFY17. The launch of Suriaman 3 @ Bandar Sri Sendayan in 1QFY17 received good response with a take-up rate of 76%, while Hijayu 3 (RM628,000 onwards) also experienced a healthy take-up rate of above 65%. Total new launches in 1HFY17 reached RM810 million, with another RM550 million to be launched in the next few quarters.

We reduce our FY17 earnings forecast by 7% after factoring in lower margins for the projects. We maintain our “buy” call and our TP is adjusted slightly from RM2.91 to RM2.89. Matrix’s dividend yield is one of the highest in the sector at 6%. — Hong Leong Investment Bank, Nov 16

This article first appeared in The Edge Financial Daily, on Nov 17, 2016. Subscribe to The Edge Financial Daily here.