Matrix has entered into a JV agreement (30% stake) for the joint development of IFD in PIK2, Jakarta. Overall, we are positive on the JV as this may lead to more opportunities to expand in Indonesia by leveraging on the expertise and connections the respective partners. With limited information, we estimate the GDV of the project to be around RM3.6bn and increase our estimated RNAV by 5.6%. Should the entire RM124m equity participation be fully debt funded, net gearing could rise to 0.16x while equity funding via placement cannot be ruled out. We maintain forecast, BUY rating and RNAV-based TP (20% discount) of RM2.21.

JV agreement inked. Following the MOU signed in May, Matrix has now entered into a JV agreement with PT Bangun Kosambi Sukses (BKS) and PT Nikko Sekuritas Indonesia (NSI) for the joint development of an Islamic Financial District (IFD) in Kosambi District, Tangerang Regency, Banten Province, Jakarta. Matrix holds 30% stake in the newly incorporated company called PT. Fin Centerindo Satu while BKS and NSI owns 40% and 30%, respectively.

Islamic financial district. The IFD is part of an initiative by the Indonesian Government to champion the Islamic Finance discipline located within the 2.4k hectare mega development within Pantai Indah Kapuk 2 (PIK 2) Sedayu Indo City, just a 10-minute drive from Jakarta Airport. We understand that the Phase 1 of the project, planned on 3.6 hectare of land, consists of a twin tower of offices on top of a retail podium, with one of the towers targeted to sell while the other to be held as investment properties. Subsequently, Phase 2 of the project with a total size of 8.4 hectare would consist of residential portions which will be determined later.

Potential GDV. The design, potential GDV and cost for the Islamic Financial District have yet to be finalized at current juncture. More details could be available soon along with the potential ground breaking ceremony in Nov 2018. We understand that the price of land in North Jakarta would cost around IDR15-25m per square meter (~RM418 psf – RM697 psf). Assuming 20% of land cost to GDV and average land cost of RM557 psf, the potential GDV for Phase 1 could be around RM1.1bn while Phase 2 could worth up to RM2.5bn. At an EBIT margin of 23%, the estimated NPV from the entire project would increase our estimated RNAV by 5.6%.

Capital requirement. The initial share capital of the JV is IDR1.5tr (~RM416.5m) with 52% of the capital to be paid within 6 months from the date of JVA and the remaining 48% to be satisfied after the completion of initial share capital injection. Any other subsequent funding will be done at the JV level. The RM124m equity participation of Matrix will be funded via internally generated funds, bank borrowings or equity fund raising exercise via placement. Should the funding turn out to be solely via debt instruments, the net gearing could rise to 0.16x from the current 0.06x.

First of many. We are positive on the venture into Jakarta as we believe this will lead to more opportunities for Matrix to expand in Indonesia. Besides, leveraging on the expertise and connections of the JV partners, BKS (owned by Agung Sedayu Group and Salim Group) and NSI would allow Matrix to build their reputation and tap into the necessary platform and local know-how expertise.

Forecast. Unchanged pending more information on the project.

Maintain BUY with unchanged TP of RM2.21 based on unchanged 25% discount to RNAV of RM2.94. We continue to like Matrix as it is well-positioned to ride on affordable housing theme within its successful townships with cheap land cost and sustained property sales. Dividend yield of circa 6% is one of the highest in the sector.

Source: Hong Leong Investment Bank Research - 4 Oct 2018