To recap, Matrix’s 1HFY19 core PAT of RM103.1m (+5.9% YoY) came in within expectations. We understand that the proceeds from completed project in Australia will be reinvested locally while JV plan in Jakarta is ongoing pending approvals from local authorities. Both property sales and property project launches improved YoY and are on track to meet the full year targets. We expect stronger 2HFY19, supported by the strong new sales and unbilled sales (1.9x cover) as well as normalized margin on the back of higher-margin product mix. Maintain forecasts and BUY rating with unchanged TP of RM2.21 based on unchanged 25% discount to RNAV of RM2.94.

1HFY19 within expectations. To recap, Matrix’s 1HFY19 core PAT of RM103.1m (+5.9% YoY) came in within expectations, accounting for 43.4% and 44.3% of HLIB and consensus full year forecasts, respectively. 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.

Setting its footprint in Jakarta. Matrix will be taking a passive approach towards the development by partnering with an experienced Indonesian developer (Agung Sedayu) who will spearhead the project given the different operating environment of property development in Indonesia. The GDV is yet to finalize at this juncture but we note that it will be in the region of ~USD300m and the margins will be similar to that of Malaysian projects commensurate to the risk of the market. In the long run, Indonesia will be a prime area for Matrix to tap into by leveraging on its expertise of affordable home development. We note that home ownership is at only c.15% of in Indonesia, which depicts the huge potential landscape for affordable housing.

Reinvesting in Australia. We understand that the proceeds from M.Carnegie (which has been completed) will be reinvested in Australia with one plot of land in St. Kilda earmarked for offices/residences. Whilst another piece of land in Greenvale has been targeted whereby the land will be subdivided into plots and sold to individual owners with additional margin from construction work done by local partner.

Project in the heart of KL. Matrix’s maiden project in Kuala Lumpur, Chambers KL, consists of 65% studio units with built-up sizes of 450sqft while the remaining 35% are 2-bedroom units ranging from 653sqft to 908sqft. As of now, the project achieved a booking of over 80%, whereas the take-up rate is at circa 60%.

Rosy outlook. We expect 2HFY19 to come in stronger, supported by the strong new sales of RM899m (+39% YoY) and unbilled sales of 1.9x cover. Besides, gross profit margin is expected to normalize to circa 50% range in 2H19 on the back of higher margin product mix after a dip in 2QFY19. We understand that RM900m worth of GDV will be launched in 2HFY19 after hitting RM807.7m in 1HFY19 (+28% YoY); on track to meet its target of RM1.7bn for FY19 (FY18: RM1.2bn). The launches include Tiara Sendayan 3 & 4, Ara Sendayan (Phase 4) and Impiana Bayu 3A in Bandar Seri Impian.

Forecast. Unchanged.

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 - 16 Nov 2018