Results

• Within Expectations: Matrix?s 3QFY17 core PATAMI surged by 64% YoY, bringing 9MFY17 earnings to RM159m (+63%), accounting for 71% of our and consensus full year earnings forecast.

Deviation

• We expect 4QFY17 result to be stronger QoQ in the absence of RM10m ESOS expenses (recognised in 3QFY17).

Dividends

• Declared interim dividend of 3.5 sen/share, bringing 9MFY17 DPS to 10sen/share, representing about 38% payout, in line with our assumption.

Highlights

• YoY: Core PATAMI (excluding RM10m ESOS expenses) increased by 64% due to higher billings of ongoing projects coupled with industrial land sales of RM45m.
• QoQ: Despite revenue falling by 12%, core PATAMI surged by 30% as gross profit margin was boosted from 42% to 60% due to contribution from higher industrial land sales with better margin.
• New property sales in 3QFY17 achieved RM331m (versus RM250m in 2QFY17), bringing 9MFY17 sales to RM837m, already exceeding our full year forecast of RM800m and on track to hit RM1bn. We attribute the stronger sales momentum to its focus on affordable mass market with pricing range below RM600k.
• Matrix had launched RM231.5m worth of projects in 3QFY17 namely Suriaman 2A at BSS, Impiana Indah and Impiana 2 at BSI. Three projects were receiving well response with average take up rate above 60%. Total new launches in 9MFY17 reached RM1.05bn with another RM670m to be launched in the next few quarters. Unbilled sales surged by 18% QoQ to historical high of RM900m, representing 1.6x over property development revenue.

Forecasts

• FY18 and FY19 earnings forecasts are raised slightly by 1% and 2% respectively after we raise our FY17 full year sales target from RM800m to RM1bn.

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 circa 6%.

Valuation

• Our TP remains unchanged at 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 circa 6%.

Source: Hong Leong Investment Bank Research - 24 Feb 2017