Newsbreak

• Matrix has proposed to acquire 21 parcels of vacant freehold agriculture land with a total of 132 acres located at Port Dickson, Negeri Sembilan for RM57m.
• The purchases are expected to be funded via internal generated fund and will complete by 4Q17.
• There are no development details at current juncture. However, potential GDV of RM700m could be undertaken in the future based on feasibility studies. Financial Impact
• The acquisition price translates to circa. RM10 psf and constitutes 8.1% of the indicative GDV before any land title conversion premium, which may cost additional 15- 30%.
• We have yet to impute the indicative GDV in our model. Assuming an EBIT margin of 35%, the potential indicative GDV could boost our RNAV by 3.2% or 2.9% of our TP.
• No material impact is expected as the acquisition will be funded by internal generated cash flow and recurring sales proceed from existing projects.

Pros/Cons

• We are neutral with positive bias on these land acquisitions as the total purchase price is considered competitive relative to GDV. The acquisitions will also expands the foothold of the company in Negeri Sembilan for future development.
• Besides, it could potentially fetch higher appreciation in value as it serves as an extension to the existing successful development of Bandar Sri Sendayan.
• For FY18, Matrix is targeting total sales of RM1-1.1bn on the back of new planned launches amount to RM1.4bn.

Risks

• Slower than expected sales; execution risks for projects.

Forecasts

• Unchanged given no material impact to our near term forecast while pending additional info from management.

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 unchanged TP of RM2.98 (based on unchanged 20% discount to RNAV of RM3.73).

Source: Hong Leong Investment Bank Research - 07 Aug 2017