• Megah Sedaya Sdn Bhd (MSSB) has indeed entered into a Strategic Joint Venture Agreement (SJVA) with MCHB Development (NS) Sdn Bhd (MCHBD), which is a wholly-owned subsidiary of Matrix Concepts Holdings Berhad (Matrix), and NS Corporation (NSCorp).

• Together, they have agreed to jointly develop approximately 1,000 acres of freehold agricultural land located in Mukim Labu, Daerah Seremban, Negeri Sembilan. We are positive about this expansion, which further strengthens Matrix’s footprint in Malaysia Vision Valley 2.0 (MVV2) development.

• Simultaneously, NSCorp finalized a Sale and Purchase Agreement (KSDB-SPA) to acquire the MVV2 lands from their titleholder, Kumpulan Sime Darby Berhad (KSDB), a subsidiary of Sime Darby Berhad, under specified terms and conditions.

• We are reiterating our BUY recommendation on Matrix with a TP of RM1.99, pegged at 1.1x P/B to FY25F BVPS of RM1.81, driven by active land acquisitions that enable establish sustainable longterm earning.

The Strategic Partnership Background

Matrix through its subsidiaries MCHB Development (NS) Sdn Bhd (MCHBD) and Megah Sedaya Sdn Bhd (MSSB), in partnership with NS Corporation (NSCorp), a state statutory body, has embarked on a strategic real estate development venture as part of the Malaysia Vision Valley 2.0 (MVV 2.0) initiative. The objective of this agreement is to collaborate on acquiring and developing approximately 1,000 acres of land, referred to as MVV2 Lands, through a Special Purpose Vehicle (SPV) company, MSSB (MCHBD 85%, NSCorp 15%). The development is planned to span a 12-year period with a possible 3-year extension. On the same date, NS Corporation (NSCorp) has also executed a Sale and Purchase Agreement (KSDB-SPA) with Kumpulan Sime Darby Berhad (KSDB), which holds the title to the MVV2 Lands and is an indirect wholly-owned subsidiary of Sime Darby Berhad. Through this agreement, NSCorp will acquire the MVV2 Lands from KSDB, subject to the stipulated terms and conditions.

The Development Rights Agreement (DRA)

This agreement is between NSCorp and MSSB, where NSCorp will grant MSSB the development rights for the MVV2 Lands. The purchase price for these rights is RM435,600,000 or RM10 psf. The DRA is subject to certain conditions precedent, such as approvals for land subdivision, title issuance, and the transfer of the land from KSDB to NSCorp. The Development Rights Payment was determined on a willing buyerwilling seller basis, considering market valuations, internal feasibility studies, and comparative market analyses.

Financial Implications

The financial impact of the agreements on Matrix's earnings for the fiscal year ending March 31, 2025, is expected to be negligible, yet they are projected to enhance future profitability. The completion of these agreements is not anticipated to significantly change Matrix's consolidated net assets for the same fiscal period. The arrangements of SJVA and DRA will be financed through Matrix's own funds and external borrowing, leading to an estimated increase in the gearing ratio from 0.15 to 0.33. It's important to note that Matrix's previous land acquisition of approximately 1,382 acres in the MVV2 area had already raised the gearing ratio to 0.1x.

Strategic Location for New Development

This collaboration aims to capitalize on the robust and stable growth of the property market in Negeri Sembilan, which is expected to continue due to its strategic location within the expanded Klang Valley corridor. The SJVA and DRA are designed to facilitate economic expansion in the region, aligning with the broader development goals of Greater Kuala Lumpur. This move is also part of Matrix strategy to enhance its land bank and extend its development reach in Negeri Sembilan, building on the momentum from the earlier acquisition of MVV1 Lands. Following the recent land acquisition, the total land available for development now amounts to 2,382 acres. The projected Gross Development Value (GDV) for this land is estimated at RM12bn, which will encompass a comprehensive and sustainable township. This township is planned to include a mix of residential, commercial, retail, and support services, along with a substantial industrial development spread over 1,000 acres. The initial phase of the development is scheduled for launch in 2026.

Maintain BUY with a TP of RM1.99

We are maintaining our recommendation on Matrix with a BUY call with a TP of RM1.99, pegged at 1.1x P/B to FY25F BVPS of RM1.81. We anticipate that Matrix will sustain its positive earnings momentum through its ongoing property developments. This expectation is further bolstered by the imminent pipeline launch scheduled for FY25, amounting to RM1.65bn, which is 1.25 times that of FY24.

Source: BIMB Securities Research - 20 Jun 2024