Matrix’s 1HFY19 core PAT of RM103.1m (+5.9% YoY) was within expectations. Declared dividend of 3.25 sen per share. The higher QoQ and YoY results were attributed to higher recognitions from the ongoing projects and the completion of M. Carnegie project in Australia. However, margin moderated due to lower margins from Australia project and other products. New sales remained strong (+75% YoY) and unbilled sales are at 1.9x cover. We keep our forecasts unchanged and maintain BUY with unchanged RNAV-based TP of RM2.21.

Within expectations. 1HFY19 revenue of RM483.4m translated into core PATAMI of RM103.1m which came in within expectations, accounting for 43.4% and 44.3% of HLIB and consensus full year forecasts, respectively. We expect subsequent quarters to come in stronger, supported by the strong new sales (+39.4% YoY) and unbilled sales of 1.9x cover.

Dividend. Declared 2nd interim dividend of 3.25 (2QFY18: 3.25) sen per share going ex on 19 Dec 2018, bringing YTD dividend to 6.5 sen per share.

QoQ. 2QFY19 revenue rose by 10.1% mainly contributed by recognition from the completion of M.Carnegie in Melbourne, along with higher sales of commercial and industrial properties. Nevertheless, core PAT only increased by 5.9% to RM52.9m due to lower margins from oversea project and other products.

YoY. Revenue for 2QFY19 improved by 24.8% to RM253.3m attributed to higher progress billing from the ongoing projects and recognition from its oversea project. Similarly, core PAT improved merely by 2.2% mainly affected by the lower margins from M.Carnegie as well as more affordable products.

YTD. Stronger revenue (+28.6%) was recorded thanks to higher progress billing from the ongoing projects and recognition of the completion of M.Carnegie. Core PAT (+5.9%) grew by lower magnitude given the lower blended margin of overall product mix such as Tiara Sendayan and M.Carnegie.

Strong sales continue. 2QFY19 new sales came in at RM517m (+75.2% from 2QFY18), bringing YTD sales to RM900m, well on track to meet the full year target of RM1.1bn. RM517m new sales consists of sales from existing townships (67.6%), Chambers KL (9.9%), M. Carnegie (17.9%), and the remaining are industrial (4.6%). Meanwhile, unbilled sales remained healthy at RM1.4bn (1QFY19: RM1.2bn), representing a healthy cover ratio of 1.9x.

Outlook. Earnings visibility will continue to be supported by the strong new sales and unbilled sales of 1.9x cover. We understand that RM900m worth of GDV will be launched in 2HFY19 including Tiara Sendayan 3 & 4, Ara Sendayan (Phase 4) and Impiana Bayu 3A in Bandar Seri Impian.

Forecast. Unchanged as the results were in line.

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 - 15 Nov 2018