Results 

• Within  Expectations:  Matrix’s  9MFY14  reported PATAMI  of  RM126.1m  came  in  within  expectations, accounting  for  77.0%  and  77.6%  of  ours  and consensus’ full year earnings, respectively.

Dividends

• 3.75 sen net DPS was declared in  3Q14, bringing YTD DPS  to  12.5  sen,  or  75.5%  of  our  14.3  sen  DPS forecast.

Highlights   

Yoy:  Revenue  and  PATAMI  continued  to  record healthy  growth  on  the  back  of  higher  sales  in  higher margins’  residential  and  commercial  property developments.

Qoq:  Revenue  qoq  declined  9%  on  the  back  of  the inability  to  recognise  the  revenue  from  Hijayu  3A  as development of the project has yet to reach a particular stage.  PATAMI  however  improved  by  recording  a growth  of  6.2%  from  better  margins  fetched  by  the group’s recently launched  development  properties.

We  understand  that  the  group’s  3QFY14’s  ongoing billings  are  largely  coming  from  Hijayu  1A  and  3A  in Bandar  Sri  Sendayan  (BSS),  and  Impiana  Bayu  1, Impiana Avenue 3 (1) and Impiana Height (phase 1) in Taman Seri Impian (TSI). New sales during the quarter were  RM159m vs. RM138m  in 2QFY14.

Apart  from  that,  Matrix  also  launched  several developments  during  the  quarter,  namely  Hijayu  3A (phase 3) in BSS and another  development in  TSI.   Its new launches  totaled to RM146m.

As at 9MFY14, the group’s total  unbilled sales stands at  RM410.5m,  representing  0.71x  of  FY13’s  property development  revenue.

Rating

BUY

• Positives :  1)  Further  upside  from  escalating  land prices  in  Seremban  as  more  Greater  KL  residents continue  to  migrate  to  Seremban;  (2)  Optimism  on  its land  replenishment  for  STV  3;  (3)  Undemanding FY15E  P/E  of  8.1x  vs.  more  than  12 -19x  for  mid  to large-cap developers; and (4)  Still attractive FY14E DY of 4.9%, based on 40% payout ratio.
• Negatives:  (1)  Lack of landbank diversification means the  company’s  fate  is  completely  tied  to  that  of Seremban.

Valuation

• Given  the  group’s  improved  sales and sustainable  earnings  in  3Q,  we  maintain  our  positive outlook for its future sales and earnings. We maintain our  TP  at  RM3.74  (20%  discount  to  RNAV),  which implies  FY15E  P/E  of  7.2x.   This  remains undemanding  vs. 12-18x  for mid to large-cap  peers.
• Maintain  BUY.

Source: Hong Leong Investment Bank Research - 18 Nov 2014