Highlights

• We attended MCHB’s bri efi ng and walked away feeling positively. Below are the key takeaways:
• Matrix decided to cap its dividend payout up to maximum of 40% as compared to minimum payout of 40% previously. We opine that this is reasonable given the concern about slowdown in the property industry and preserving cash for potential landbanking opportunity.
• We conservatively assume 35% dividend payout (versus 40% previously) in FY17 and FY18, which still translates to 6.0% dividend yield, remaining the highest among our coverage.
• Take up rate for ongoing project remains encouraging. Suriaman Phase 1 and 2’s take up rate has increased from 58% to 73% QoQ while the recent launched Hijayu 3 saw encouraging take up rate above 51%. Matrix will be launching Phase 3 for Hijayu 3 (GDV:RM115m) and Suriaman 2B (GDV:RM154m) in 2Q16.
• Matrix will also be launching its maiden project in Melbourne, Australia with GDV of AUD30m by end of May16. This project comprises of 52 units of low rise apartment with selling price starting from AUD450k onwards. We believe this project will be well taken up given its location near Melbourne CBD.
• Kota Gadong Perdana project (GDV: RM1.4bn) which comprises of 3200 units of affordable house (build-up of 2k above) priced around RM400k will only be launched in end of 2016 or early 2017. This will help to sustain future sales given its affordable pricing range. Overall, Matrix remains bullish on the prospects of BSS and maintains its sales target of RM1bn (versus our estimate of RM800m).

Forecasts

• Unchanged.

Rating

BUY

• Positives: 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 FY17E DY of 6.2%.

Negatives

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

Valuation

• Maintain BUY with unchanged TP of RM2.91 (unchanged 20% discount to RNAV). Dividend yield remain attractive at 6.0%.

Source: Hong Leong Investment Bank Research - 23 May 2016