Matrix Concepts Holdings (MCH) is primarily a Negeri Sembilan-based property developer which started by focusing on affordable housing. It now has exposure to a wide range of property offerings priced from the affordable range (RM400k RM600k) to more than RM1m. The Group has projects in the Klang Valley and others countries such as Australia and Indonesia. Currently, it owns a remaining total landbank of c. 1,382 acres with estimated gross development value (GDV) in excess of RM15bn. Unbilled sales as at 3QFY23 stood at RM1.4bn, with RM662m pre-sales secured (or 55.2% of FY23 sales target of RM1.12bn). We like MCH for its consistent performance in delivering superior margins (averaging c.51% gross margin for the last 5 years) and commitment to paying out at least 50% of its earnings quarterly (5.8% yield in FY22) as dividends. We initiate coverage on MCH with an Outperform call, and a book-valued based target price (TP) of RM1.80, translating to an implied PER of 11x. 

• Anchored by its flagship development, Sendayan Developments (BSS). MCH is the leading developer in Negeri Sembilan, with over 2,000 acres of on-going and future landbank located 15-20 minutes away from Seremban town, which has benefited from spill over demand from Klang Valley due to its proximity to the KL International Airport and which is about 72km (or about an hour’s drive) from the Kuala Lumpur City Centre (KLCC). BSS remains the key revenue driver for the Group, accounting for more than 80% of MCH’s total revenue in 1HFY23. BSS is left with landbank of almost 1,647 acres with GDV in excess of RM5bn. Not resting on its laurels, it also in the process of completing a land deal to add another 1,382 acres in Malaysia Vision Valley (MVV) with potential GDV of RM7bn. The new land, we understand, is priced at about RM7.64psf or at RM460m.
• Good earnings visibility. MCH has c. 2,158 acres of landbank with estimated GDV in excess of RM15bn. In 1HFY23, the Group secured RM662m pre-sales with unbilled sales standing at RM1.4bn, which will underpin its earnings in the next 12 to 15 months. We believe that the Group can maintain its sales momentum, with overall take-up rate at 90.2%. Net margins are also expected to remain stable despite cost pressures and supply chain disruptions. Its net margin as at 2QFY23 was at 22.7%, which is close to its 5-year average of 22.2% due to a low land cost of MYR9psf (in BSS), and cost savings from in-house procurement and construction.
• 50% dividend payout policy. MCH is committed to paying out at least 50% of its earnings quarterly, or translating to average dividends of c.10 sen a year or 5.8% yield. The Group has been consistently paying out dividends since 2013 despite market challenges, continuing even during the COVID induced lockdown periods in FY21-22.

Source: PublicInvest Research - 21 Feb 2023