• BUY
• Target Price: RM2.09
• Current Price: RM1.89

Capital Upside: RM0.2

Dividend yield: 6.7%

Expected Return: 17.28%

• Bursa Code:                     5236
• Sector Coverage:             Property
• Issued Shares (M):           822M
• Market Capital (M):          1,555M
• Shariah-compliant:          Yes
• Dividend Policy:               40%
• Company Description:    Matrix is a property company which primarily focus in Negeri Sembilan and Kluang in Johor. Matrix include four main business division which is property development, hospitality (Club and Hotel), education and construction.

The outlook for the property market in 2019 to remains cautious due to the mismatch of house prices and affordability, as well as limited access to creditor mortgage by potential homebuyers. However, since the change in government and a new era, I believe Malaysia property market is perceived close to its bottom cycle, especially the affordable segment after various initiatives announced by the new administration.  The property sector will require time to recover as Malaysian property market is facing a clear mismatch between demand and supply, particularly from the B40 and M40 group, are priced out of the property market. Nevertheless, the mismatch provides an opportunity for Matrix as currently most of the project launched by Matrix was more focus on affordable property segment.

• Revenue back up by strong new sales and unbilled sales. As at 31 March 2019, total property unbilled sales stood at RM1.2 billion. With regards to sales target, management has decided to set a flat target of RM1.3B for financial year 2020.
• Well positioned to capture market opportunities. Matrix’s strategy to offer more affordable homes in property mix has enabled it to meet real market demand and thereby register robust sales performance.
• A generous dividend paymaster. Historically, Matrix has continued to declare attractive yields (>5%) on the back of high payout ratio (>40%) from FY 13-19.

• Heavily dependent on its property development business. 96.69% of total Matrix’s revenue was from the property development segment which heavily dependence on one-off development sales.
• Profit margin has been affected with the change of portfolio mix. Greater proportion of Mid-Range Properties in the overall portfolio mix significantly affect its profit Margin.
• Property sector downturn is likely to persist. With a lack of stimulus by the public sector and economic growth moderating, the present property sector downturn is likely to persist.
• EPS has been diluted due to private placement. The increase in the number of shares outstanding has been diluted the company’s earnings per share.

• According to HLIB’s research report, based on 25% discount to RNAV of RM3, the target price is RM2.25.
• Based on 5-year average PE 7.22, EPS 29, and 6.4% dividend yield, fair value for MATRIX stand at RM2.09. Any price below RM2.09 can be considered as undervalued.
• Based on technical analysis, currently Matrix’s stock price is still on a downtrend which indicated by the 50 DMA falling below the 150 DMA and both Moving average sloping downward. The first support point for Matrix will be RM1.89.

All the opinions expressed in our post are for informational purposes only and you should take your own risk for any investment. We shall not be held liable for any losses and damages.