To recap, Matrix’s 9MFY19 core PAT of RM151.7m (-9.7% YoY) came in below expectations largely due to a lower than expected margin product mix. Over RM500m worth of GDV will be launched in 4QFY19, on track to meet the full year launch target of RM1.7bn; note that these projects command lower margins vis- à-vis the historical product mix. There are currently no plans on further landbanking activities in Australia in the near-term (focus will be placed on areas surrounding BSS instead). Maintain forecasts and BUY rating with unchanged TP of RM2.17 based on unchanged 25% discount to RNAV of RM2.90.

9MFY19 below expectations. To recap, Matrix’s 9MFY19 core PAT of RM151.7m (- 9.7% YoY) came in below expectations, accounting for 64% and 66% of HLIB and consensus full year forecasts, respectively. The lower QoQ and YoY results were attributed to a lower than expected margin product mix and a high base effect in 3QFY18 from the sale of industrial properties.

Australian projects. Recall that the proceeds from M.Carnegie (which has been completed) will be reinvested in Australia into two projects i.e. Greenvale and St. Kilda. The Greenvale project is targeted to launch in mid-FY19 and fetch over AUD20m worth of GDV. With regards to the St. Kilda project, the targeted launch date will be in mid-FY20; the project is expected to generate a GDV of at least AUD78m and management is in midst of seeking approval to increasing its plot ratio. Management guided there are currently no plans of further landbanking activities in Australia in the near-term. Instead, landbanking activities will be focused on areas surrounding the BSS township.

Chambers, KL. Matrix’s maiden project in Kuala Lumpur, Chambers KL, was launched back in August 2018 with a GDV of RM310.8m. We note that the construction progress is at c.10% and we can expect bulk of the revenue recognition to take place in FY19 and FY20. As of now, the project achieved bookings of over 80%, whereas the take-up rate stands at c.50%.

FY19 sales target to be exceeded. We expect 4QFY19 to come in strong, allowing Matrix to exceed its sales target of RM1.2bn (from RM1.1bn initially). Recall that 9MFY19 sales figures have already hit RM1.14bn.

Outlook. We understand that over RM500m worth of GDV will be launched in 4QFY19, on track to meet the full year launch target of RM1.7bn. Notable launches include Ara Sendayan Phase 5 (RM104m), and Tiara Sendayan Phase 3 & 4 (RM364m) (Figure #1); note that these projects command lower margins vis-à-vis the historical product mix. Moving forward, earnings visibility will continue to be supported by the strong new sales and unbilled sales of 1.7x cover, albeit having a lower margin product mix.

Forecast. Unchanged as we have already lowered our earnings forecast in our results review yesterday. Maintain BUY with unchanged TP of RM2.17 based on unchanged 25% discount to RNAV of RM2.90. We continue to like Matrix as it is well-positioned to ride on the 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 - 22 Feb 2019