Highlights

• We met MCHB’s management recently and retain our positive view on the company after the meeting. Below are the key takeaways:

• Robu st sales from Bandar Sri Sendayan (BSS)… With affordable pricing range of below RM600k, new sales from BSS remain encouraging despite the challenging property outlook. Suriaman 1 (124 units, 20x75) with staring price of RM508k onwards has been fully sold out and latest Suriman 2B (RM608k, 22x80) also secured good take up rate of 65% after launched a month ago. Hijayu 3 (RM628k onwards) also experienced healthy take up rate of 63%.

• Increasing buyers from Klang Valley… Given the affordable pricing of landed properties, there are increasing buyers from Klang Valley, which currently account about 60% of buyer mix versus 20% previously.

• Good take up rate for the maiden project in Melbourne… Matrix has launched its maiden project, M. Carnegie in Melbourne Australia (GDV: AUD30m). The projects comprise 52 units of low rise apartments with starting price of AUD 450k. This project received good response with circa 65% take up rate with remaining units from lower floor.

Dividend

• yield remains high at 6% despite cap… To recap, Matrix decided to cap its dividend payout up to maximum of 40% as compared to minimum payout of 40% previously. We conservatively assume 35% dividend payout in FY17 and FY18, which still translates to 6.0% dividend yield, being the highest among our coverage.

• HSR – long term catalyst… With the recent signing of MoU, the 350km HSR with 8 stations is expected to be completed by 2026. As one of the stations will be located at Seremban, this will undoubtedly enhance land values and benefit land owners like Matrix, which has remaining 1,200 acres of landbank (remaining GDV: RM5bn).

• Maintain sales target of RM1bn (+22% YoY)… 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: Further upside from escalating land prices in Seremban as more Greater KL residents continue to migrate to Seremban;

• Negatives: 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 remains attractive at 6.0%.

Source: Hong Leong Investment Bank Research - 9 Aug 2016