News

• Matrix proposed a bonus issue of up to 77.8m new shares on the basis of one bonus share for every 6 existing shares held.
• The group also proposed bonus issue of up to 77.8m free warrants on the basis of one warrant for every 6 existing shares held. The bonus shares will not be entitled for the free warrants.
• The proposals announced are expected to be completed by 2HFY15.

Highlights

• We are neutral to slightly positive on the proposed announcement as it would result in a larger share base capital, enhancing the liquidity and marketability of the shares.
• The proposed bonus issue of warrants would have a 5- year maturity period of which can be exercised at any time, commending on and including the date of issuance.
• As for the impact towards share base, the minimum case scenario woul d enlarge Matrix’s share base by 16.7% to 538.3m shares.
• Assuming all dilutive securities are exercised (maximum case scenario), the group’s share base would increase to 622.7m shares.

Forecasts

• Maintained as the proposed corporate exercises does not result any significant changes to our forecasts.

Rating

BUY

• Posi tives: 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 7.6x vs. more than 12-18x for mid to large-cap developers; and (4) Still attractive FY15E DY of 5.3%, based on 40% payout ratio.

Negatives

• Lack of landbank diversification means the company’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.
• Post-bonus issue, out TP would be adjusted from RM3.30 to RM2.83.

Source: Hong Leong Investment Bank Research - 16 Apr 2015