Results

• Matrix’s FY17 revenue surged to RM780.4m (+31.2%) while core earnings grew to RM208.4m (+43.0%), accounting for 92.8% of ours and 96.9% of consensus full year earnings forecasts, respectively.

Deviation

• Blended margin was slightly lower than expected due to recognition of lower margin products in this quarter.

Dividends

• Declared interim dividend of 3.75 sen (going ex on 2 Jun 17), bringing FY17 DPS to 13.8 sen, representing about 38% payout, in line with our assumption.

Newsbreak

• In a separate announcement, Matrix has proposed bonus issue on the basis of one (1) bonus share for every four (4) existing shares, subject to approvals from shareholders and is expected to complete in 2QFY18.

Highlights

• QoQ: Both revenue (-18.5%) and core PATAMI (-18%) fell due to lower revenue recognition from property development.

• YoY: 4QFY17 core PATAMI (excluding RM10.6m ESOS expenses) increased by 3.4% despite a 23.6% drop in revenue on the back of improved gross profit margin from 53% to 59% resulting from recognition of higher margin products.

• New property sales in 4QFY17 achieved RM193.1m (vs RM168.7m 5QFY16), bringing FY17 sales exceeding RM1bn. Sales were mainly derived from its flagship Bandar Sri Sendayan (BSS) in Seremban and Bandar Seri Impian in Kluang.

• Matrix had launched RM60.6m worth of projects in 4QFY17 namely Suriaman 2A and Hijayu 3 at BSS, with strong take-up rate >80% for all ongoing projects. Total targeted new launches in FY18 amount to RM1.4bn.

• Total unbilled sales stands at RM859.5m down from a historical high of RM900m last quarter, representing 1.1x over FY17 property development revenue.

Forecasts

• We impute the latest FY17 balance sheet figures and fine tune our model. In turn, this has led to revisions in our FY18 and FY19 earnings forecasts by +2% and -4% respectively.

Rating

BUY ( ↔ )

• We continue to like Matrix as it is well-positioned to ride on affordable housing theme (majority products are below RM600k) within its successful township. HSR is a long term catalyst and its dividend yield is one of the highest in the sector at circa 6%.

Valuation

• Maintain BUY with higher TP of RM2.98 (from RM2.89) (based on unchanged 20% discount to RNAV of RM3.72)

Source: Hong Leong Investment Bank Research - 17 May 2017