• Downgrade to HOLD from BUY (TP: RM1.99). Matrix's 1QFY25 revenue fell by 15.6% YoY to RM279.7mn from RM331.4mn in 1QFY24. This was due to lower revenue contributions from the property development segment, as revenue recognition from its flagship Sendayan Developments reduced by 16.6% to RM250.3mn in 1QFY25 from RM300.0mn in the 1QFY24. However, Matrix’s 1QFY25 core profit only declined by 6.1% YoY to RM60.7mn (1QFY24: RM64.6mn), benefiting from effective cost management efforts. Consequently, EBITDA margin expanded by 3ppts to 30.2% in 1QFY25 from 27.3% in 1QFY24. Overall, Matrix’s 1QFY25 core net profit was inline with our and Bloomberg consensus’ estimates at 22% and 23%, respectively. We downgrade our call to HOLD from BUY while maintaining our target price (TP) of RM1.99, pegged at 1.1x P/B to FY25F BVPS of RM1.81, as the potential upside to the share price is now below 10%. We believe the current share price already reflects the fundamental value of the stock.

• Key Highlights. On QOQ basis, revenue declined by 20.8% due to lower revenue recognition from the property development segment, as contributions from Sendayan Developments was reduced by 23.4% to RM250.3mn from RM326.8mn in the 4Q24. Despite the decline in the property development segment contribution, the education and hospitality sectors saw a combined increase of 4%, rising to RM11.8mn from RM11.4mn in 4Q24. Additionally, Mawar Medical Centre's contributed of RM4.3mn in the current quarter supported the overall revenue growth, fuelling a significant 42.2% increase across its other business units. Although revenue decreased, core net profit remained stable, supported by the company’s ongoing cost management efforts. The company also declared a first interim single-tier DPS of 2.5sen for 1QFY25, representing a 52% payout ratio with a yield of 1.3%.

• Earnings Revision. No earning revision.

• Outlook. We anticipate that Matrix will sustain its positive earnings momentum through its ongoing property developments and continuous cost management efforts. This view is supported by the imminent pipeline launch scheduled for FY25, amounting to RM1.7bn, which is 1.25 times that of FY24. Additionally, Matrix benefits from robust contributions from its healthcare unit, and this income stream is expected to strengthen due to an anticipated increase in patient beds over the next 12 months.

Source: BIMB Securities Research - 23 Aug 2024