Results

• Slightly Below Expectations: Matrix’s 2QFY17 PATAMI surged by 50% YoY, bringing 1HFY17 earnings to RM98.4m, accounting for 40% of our and consensus full year earnings forecast.

Deviation

• Mainly due to lower margin of project mix.

Dividends

• Declared second interim dividend of 3.25 sen/share, bringing 1HFY17 DPS to 6.5sen/share, representing about 37% payout, in line with our assumption.

Highlights

• YoY: PATAMI increased by 50% due to higher billings of ongoing projects coupled with industrial land sales of RM18.9m.

• QoQ: Despite revenue increasing by 15%, PATAMI fell by 10% due to lower margin of project mix as the company launched more affordably-priced projects.

• Sales momentum was sustained into 2QFY17 with new sales reaching RM250m (1QFY17: RM256m), bringing 1HFY17 total sales to RM506m or 50% of full year sales target of RM1bn (versus our conservative estimate of RM800m). We expect sales to be sustained given its focus on affordable mass market with pricing range below RM600k.

• We understand the company had sold 2 pieces of industrial land. Total industrial land sales in 1HFY17 amounted to RM31m versus company full year target of RM50m.

• Matrix had launched RM270m worth of projects in 2QFY17. The launch of Suriaman 3 @ BSS in 1QFY17 had received well response with take up rate of 76% while Hijayu 3 (RM628k onwards) also experienced healthy take up rate above 65%. Total new launches in 1HFY17 reached RM810m with another RM550m to be launched in next few quarters.

Forecasts

• We reduce our FY17 earnings by 7% after factoring in lower margin for the projects.

Rating

BUY ( ↔ )

• Well positioned to riding on the affordable housing theme (majority products are below RM600k). HSR is a long-term catalyst. Dividend yield is one of the highest in the sector at 6%.

Valuation

• Our TP is adjusted slightly from RM2.91 to RM2.89 (based on unchanged 20% discount to RNAV of RM3.61). Maintain BUY. Dividend yield is one of the highest in the sector at 6%.

Source: Hong Leong Investment Bank Research - 16 Nov 2016