Investment Highlights

• Stock idea. Matrix Concepts Holdings (Matrix) is a Negeri Sembilan-based property developer. Its flagship project, Bandar Seri Sendayan, has successfully achieved a strong average take-up rate of over 80% for both landed residential and commercial properties. To date, Matrix has completed projects worth a substantive RM9.9bil in gross development value (GDV) on 3,710 acres of land.

• Matrix has also expanded its footprint in Klang Valley, Kluang in Johor, Melbourne in Australia and Indonesia (via a 30% joint venture stake in Jakarta). The group’s remaining 1,832-acre landbank worth a robust GDV of RM8.7bil, should provide earnings visibility for the next 8 years at least.

• The group achieved a 4-year FY17/21 CAGR revenue growth of 9.8% while maintaining an average PATAMI margin of 22% despite the challenging property market environment caused by the Covid-19 pandemic. As Matrix has a minimal 1HFY22 net gearing level of only 4%, we believe it has significant headroom to gear up for new land acquisitions.

• Matrix has consistently rewarded its shareholders with a dividend policy of 40% over the past 5 years, which translates to a fair dividend yield of 5% currently. The company declared 5 sen dividend in 1HFY22 results, equivalent to an even higher payout ratio of 52%, indicating that management is aiming for a higher distribution target.

• We believe that the key competitive advantages of Matrix are: 1) affordable products with an attractive pricing strategy offering selling prices that are lower by up to 40% on a psf compared to its peers such as IJM Land which is present in the same area; and 2) savvy key senior management in execution, marketing and patient cultivation of demand from the industrial, commercial and residential segments in a huge rural and agricultural area that was formerly owned by FELDA settlers.

• Key risks to the group include lower-than-expected property sales, fluctuation in costs of building materials and slower recovery in its education segment due to pandemic restriction-led intermittent closures of schools.

• Based on consensus earnings, the stock conservatively trades at FY22F PE of 7x vs. the sector’s average 17x and at a 25%–35% discount to the company’s RNAV. We are optimistic on Matrix’s long-term outlook premised on its: 1) huge development pipeline in the Greater Klang Valley area called Malaysia Vision Valley, partly supported by niche projects in Kuala Lumpur and overseas; and 2) potentially higher dividend payouts from a strong balance sheet.

Source: AmInvest Research - 3 Feb 2022