Highlights

• We attended MCHB’s bri efi ng and walked away feeling positively. Below are the key takeaways:
• Despite concern on the slowdown in property industry, Matrix achieved another record year of new sales of RM806m (+28% YoY), beating our estimate of RM720m mainly due to its focus on affordable mass market with pricing range below RM600k.
• Out of the total RM806m sales, industrial land only comprise of RM24m with the rest from residential and commercial sales.
• The company is targeting to launch RM1.5bn worth of project in FY16 (versus RM876m in FY15). 90% of the launches are from Bandar Sri Sendayan (BSS) with the remaining 10% from Bandar Seri Impian (BSI). Matrix remains bullish on the prospects of BSS and is targeting about RM1bn of new sales (RM50m from industrial land sales) in FY16 (versus our estimate of RM800m).
• In addition, Matrix is planning to launch a 4 storey apartments in Melbourne with potential GDV of A$30- 32m in 2Q16. We understand the project has received overwhelming responses from the potential buyers.
• Kota Gadong Perdana project (GDV: RM1.4bn) which comprises of 3200 units of affordable house priced around RM400k will only be launched in end of 2016 or early 2017. This will help to sustain sales in future.
• Unbilled sales remain healthy at RM633m representing 1.06x of FY14’s property development revenue.

Forecasts

• FY16 and FY17 earnings were raised by 4% respectively after we raised FY16 sales target from RM720m to RM800m (still below company target of RM1bn).

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; and (3) Still attractive FY16E DY of 7.4%.

Negatives

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

Valuation

• Our TP is increased slightly from RM2.90 to RM2.91 (unchanged 20% discount to RNAV) post our revision on earnings.
• Maintain BUY. Dividend yield is one of the highest in the sector at 7.4%.

Source: Hong Leong Investment Bank Research - 26 Feb 2016