Highlights

• Bandar Sri Sendayan (BSS) remains the largest contributor to the group. The township launched RM575m worth of projects throughout FY14 with average take-up rate of 76.1% of its going projects. Lower take-up was due to progressive take-up rates from its new launches (Hijayu 3A, phase 3 and 4).
• Matrix plans to promote its private and international schools once the final portion of the development is complete in May 2015. In order to breakeven, the group has to have at least 1,000 students enrolled, of which management do not see difficulties in reaching that by end-FY15.
• We believe Matrix’s future earnings growth is sustainable given its large landbank of more than 1,300 acres to be developed across 8 years (est. GDV of RM6.4bn). For FY15 alone, the group targets to launch RM1.1bn worth of projects.
• With high-capex phase coming to an end (development of school and clubhouse), Matrix guided that capex for FY15 would be low at approximately RM20-30m. Management assured that dividend policy of minimum 40% remains intact.
• The group targets RM700m worth of sales for FY15 (flattish yoy), of which RM600 would be under residential and commercial and remaining RM100m for industrial land sales. However, management is positive that Matrix would be able to surpass the RM100m sales target for land sales.
• To meet regulations for low-cost housing developments, Matrix plans to purchase a 20-acre land by end-2015 to develop 600 units of landed low-cost houses across 3 years. Due to lower house prices, management shared that the group could incur losses of RM9m cumulatively for the mentioned 600 units.
• However, we do not see this as a significant setback and this could potentially be offset by the higher margins fetched by its upcoming projects which comprises more mid- to high-end developments.

Forecasts

• Maintained.

Rating

BUY

Positives

• 1) Further upside from escalating landprices 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;and (4) Still attractive FY15E DY.

Negatives

• Lack of landbank diversification means thecompany’s fate is completely tied to that of Seremban.

Valuation

• We maintain our TP at RM3.30 (unchanged 30% discount to RNAV), which implies FY15E P/E of 7.9x.

Source: Hong Leong Investment Bank Research - 16 Feb 2015