Results

• Above Expectations: Matrix’s 1QFY15 reported PATAMI of RM115.4m came in above expectations, accounting for 60.7% and 58.7% of ours and consensus’ full year earnings, respectively.

Deviations

• Higher-than-expected revenue recognition from industrial properties.

Dividends

• Declared fi rst interim dividend of 4.25 sen/share, representing dividend payout and yield of 16.9% and 1.3%, respectively.

Highlights

• Qoq: Revenue and PATAMI grew signi ficantly by 110.3% and 104.2% respectively on the back of higher revenue recognition from the group’s sales of development properties as a result of accelerated project completion of its launched residential projects. Besides, sales in industrial properties have boosted 1QFY15’s performance as well.
• Yoy: Apart from similar reasons to the yoy growth mentioned above, the tremendous improvement of 135.8% and 199.5% were also contributed by 2 new revenue segments, education segment and clubhouse operations, which totalled RM2.2m.
• We understand that the signi ficant jump in industrial properties were attributable to payments being brought forward from 2Q and 3Q due to GST. These advance payments is said to amount to approximately RM60m, totalling the industrial properties sales to RM95m in 1QFY15 alone. As such, we expect revenue recognition in 2Q and 3Q to weaken following this.
• We gathered that total new sales for FY15 were RM156.8m while unbilled sales stood at RM392.0m, representing 0.66x of FY14’s property devel opment revenue.
• Matrix remained unchanged on its sales target for the year with approximately RM700m, whereby residential properties makes up RM600m while the remaining would be from industrial land sales. However, we would not be surprised i f the group were able to clock in higher industrial land sales given its track record.

Forecasts

• Unchanged as we expect 2Q and 3Q to weaken as most industrial properties sales have been recognised in 1QFY15.

Rating

HOLD

• 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; and (3) Still attractive FY15E DY of 5.6%, based on 40% payout ratio.

Negatives

• (1) Lack of landbank diversification means the company’s fate is completely tied to that of Seremban.

Valuation

Target price remained unchanged at RM3.30 based on 30% discount to RNAV. We downgrade Matrix to HOLD from BUY as we believe share price has fully reflected its fundamentals after the recent run-up.

Source: Hong Leong Investment Bank Research - 13 May 2015