Results

• Within Expectations: Matrix’s 2QFY15 reported PATAMI of RM30m bringing 1HFY15 to RM145.3m, accounting for 76.3% and 73.8% of ours and consensus’ full year earnings, respectively.

Deviations

• Mainly due to higher revenue recognition from industrial properties in 1QFY15 which were brought forward from 2Q and 3Q. Thus, 3QFY15 earnings will be lower than 1QFY15 due to absence of industrial land sales.

Dividends

• Declared second interim dividend of 3.5 sen/share, bringing 1H15 total dividend to 7.1sen/share (versus our full year forecast of 14 sen/share).

Highlights

• QoQ: Revenue and PATAMI fell by 26% and 29% respectively mainly due to absence of industrial land sales (recognised RM95m of industrial land sales in 1Q15). We understand that the signi ficant jump in industrial properties in 1QFY15 was attributable to payments being brought forward from 2Q and 3Q due to GST.
• New sales for 2QFY15 grow by 34% QoQ bringing 1HFY15 new sales to RM367m, on track to achieve company full year target of RM600m. New launches like Hijayu 3B (GDV: RM196m) and Hijayu Resort Homes, Phase 1A (GDV:RM70m) have enjoyed take up rate of 37% and 35% respectively, partly help to drive the new sales in 2Q15.
• To note, take up rate for existing Hijayu 3A Phase 4 has surged from 32% to 96% QoQ. We continue to see sustained demand for affordable houses especially those with prices below RM600k which will continue to enjoy good take up rate.
• Unbilled sales also surged by 38% QoQ to RM540m representing 0.9x of FY14’s property development revenue.

Forecasts

• Unchanged pending analyst briefing later today.

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 6.3%, 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 adjusted from RM3.30 to RM2.52 based on unchanged 30% discount to RNAV posted adjustment on bonus issue and free warrants. Maintain HOLD with dividend yield of 6.3%.

Source: Hong Leong Investment Bank Research - 11 Aug 2015