Highlights

Background… Matrix Concepts Holdings Bhd (MCHB) is involved in property development, with balance landbank of more than 1,500 acres and approximately RM5.0bn balance GDV in Seremban and Johor.

2005 a watershed year… As this was the year in which MCHB obtained landbank for both its Bandar Seri Sendayan (BSS) and Taman Seri Impian (TSI) flagship projects.

> 15 years’ track record... To-date, MCHB has completed more than 20,000 units of residential and commercial properties with an estimated total GDV of RM2.1bn, with overall takeup rate close to 100%.

Future landbank… MCHB has a land bank of close to 1,500 acres located in Negeri Sembilan and Kluang, and we understand that all its landbank have obtained the necessary development approvals.

Diversified approach… We like MCHB’s focus in the affordable housing segment, which fits well into its integrated township business model. MCHB’s commercial and industrial properties are primarily built within the vicinity of its residential developments.

Catalysts

Key catalytic projects: (1) TUDM Academy, (2) Sendayan Auto City, and (3) Sendayan TechValley.

We foresee critical mass building in BSS, with a good mix of civil servants, TUDM personnel and the private sector, which would also attract expatriate residents to BSS.

Auto hub… We also foresee the rise of BSS to become the automotive hub of Negeri Sembilan, as the arrival of international automotive and aviation players would in turn attract vendors and suppliers to set-up their operations in the vicinity to reap cost savings and business opportunities.

RM10bn Icon Park…Once the industrial zones are in place, we expect MCHB to roll out the high-value commercial developments such as Icon Park (indicative GDV: RM10bn).

Dividend story… We understand from management that IPO subscribers can expect a bumper dividend payout upon listing, which we estimate at 26.0 sen per share (for more details, please refer to our section on Dividends), which would translate into a generous 11.8% DY upon listing, based on the RM2.20 IPO issue price.

Earnings

We forecast earnings growth of 15-24% for FY13-15, driven by a combination of RM445m of unbilled sales, annual launch assumption of RM750-900m, and 75% takeup rate.

Risks

• High portfolio concentration (only BSS and TSI).
• Failure to build critical mass in BSS.

Valuation

• Based on our RNAV estimate of RM3.45, our indicative valuation of the company is RM2.59 per share (25% discount to RNAV), for total return of 29.5%.

Source: Hong Leong Investment Bank Research - 13 May 2013