Matrix’s 9MFY19 core PAT of RM151.7m (-9.7% YoY) was below expectations, largely attributed to a lower than expected margin product mix. Declared dividend of 3.0 sen per share. 3QFY19 new sales came in at RM243m, bringing YTD sales to RM1143m, well on track to meet the full year target of RM1.2bn. Earnings visibility will continue to be supported by the strong new sales and unbilled sales of 1.7x cover. We lower our FY19 to FY20 forecasts by 14%, 14% and 9%, respectively after taking into account lower margins moving forward. Maintain BUY with lower RNAV-based TP of RM2.17.

Below expectations. 9MFY19 revenue of RM769m translated into core PATAMI of RM151.7m which came in below expectations, accounting for 64% and 66% of HLIB and consensus full year forecasts, respectively. The lower than expected results were largely due to a lower than expected margin product mix.

Dividend. Declared 3rd interim dividend of 3.0 (3QFY18: 3.5) sen per share going ex on 19 Mar 2019, bringing YTD dividend to 9.5 sen per share.

QoQ. 3QFY19 revenue rose by 12.8% to RM285.7m mainly contributed by higher revenue recognition from the sales of residential properties. However, core PAT decreased 8.2% to RM48.6m due to the product mix comprising more affordably priced products.

YoY. Revenue for 3QFY19 improved by 7.3% mainly attributed to higher revenue recognition from the sales of residential and commercial properties. In contrast, core PAT decreased by 31.1% due to the product mix comprising more affordably priced products and a high base effect in 3QFY18 from the sale of industrial properties.

YTD. Stronger revenue (+19.8%) was recorded thanks to higher progress billing from the ongoing projects and recognition of the completion of M.Carnegie. Core PAT decreased by 9.7% due to the product mix comprising more affordably priced products and a high base effect in 9MFY18 from the sale of industrial properties.

Strong sales continue. 3QFY19 new sales came in at RM243m (-17.6% from 3QFY18), bringing YTD sales to RM1143m, well on track to meet the full year target of RM1.2bn. RM243m new sales consists of sales from existing townships (62%), Chambers KL (30%), and the remaining are industrial (8%). Meanwhile, unbilled sales remained healthy at RM1.4bn (3QFY19: RM1.1bn), representing a healthy cover ratio of 1.7x.

Outlook. Earnings visibility will continue to be supported by the strong new sales and unbilled sales of 1.7x cover. We understand that over RM500m worth of GDV will be launched in 4QFY19 including Tiara Sendayan 3 & 4, Ara Sendayan (Phase 5) and Impiana Bayu 3A, on track to meet full year launch target of RM1.7bn.

Forecast. We lower our FY19 to FY20 forecasts by 14%, 14% and 9%, respectively after taking into account lower margins moving forward. Maintain BUY with a lower TP of RM2.17 (from RM2.21) based on unchanged 25% discount to RNAV of RM2.90 to reflect the adjustment in our forecasts. 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. This is supported by an attractive dividend yield of 6.2% for FY19 and 7.0% for FY20, being one of the highest in the sector.

Source: Hong Leong Investment Bank Research - 21 Feb 2019