Highlights

• We attended MCHB’s briefing and bel ow are the key takeaways:
• In 2Q15, Matrix launched RM302m worth of new projects, comprising Hijayu Resort Homes Phase 1A (GDV:RM49m), Hijayu 3B (GDV:RM196m) and Impian Bayu 2 (GDV:RM57m). Both Hijayu Resort Homes and Hijayu 3B achieved take up rate of 36% and 38% in 2 months since launched.
• Given the current headwind in property sector, Matrix has delayed RM332m worth of new projects from 2H15 to 1Q16 with only Residency SIGC to be launched in 2H15, bringing FY15’s target launch to RM666m (versus RM657m in 2014).
• The company also revised down its industrial land sales from RM100m to RM50m but property sales raised from RM600m to RM650m. Hence, sales target for FY15 remain unchanged at RM700m. We believe it is fairly achievable given 1H15 sales already hit 53% of full year target.
• Revenue from education and club house segment contributing about 3% to total revenue in 2Q15 and the company is targeting for 10% revenue contribution in 5 years. Total students enrolled reached 500 as of Aug 15 and is still on track to reach targeted 800 students by end-FY15.
• The recent changes in affordable housing policy (which now requires 50% of new houses to be priced below RM400k per unit) and increase in bumiputra ownership quota (from 30% previously to 50%) for new residential schemes in Negeri Sembilan will have minimal impact on Matrix’s property sales there, given that some of its existing property township projects already comprised of circa 50% bumiputra buyers. We also gather than loan rejection rate for Matrix’s projects is low at about 2% as compare to some industry peers at 40%.
• Going forward, Matrix will continue to focus on affordable housing to weather through the softening market. We gather that Kota Gadong Perdana project (GDV:RM1bn) which comprise 3200 units of affordable house with price below RM400k is expected to be launched in 1H16 which will help to sustain sales.

Forecasts

• Maintained.

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; (3) Still attractive FY15E DY.

Negatives

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

Valuation

• We maintain our TP at RM2.52 (unchanged 30% discount to RNAV), which implies FY16E P/E of 6.5x. Maintain HOLD.

Source: Hong Leong Investment Bank Research - 12 Aug 2015