Matrix has entered into a JV to purchase a land (309.5 acres) located beside its BSI township for a consideration of RM91.7m. Note that 100% of profits from the development will be fully recognised by Matrix. We estimate the development will yield Matrix with a NPV of RM87m (increasing RNAV by 3.7%), assuming PBT margin of 20% at WACC of 10%. Our pro forma calculation implies net gearing will remain at 0.09x (as at 3Q19) after taking into account the initial deposit of RM10m required for the land. Our forecast remains unchanged as we expect contributions to take place only in 2022. Maintain BUY with a higher TP of RM2.25 (from RM2.17) based on unchanged 25% discount to RNAV of RM3 after imputing the GDV contributions from this transaction. 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.

NEWSBREAK

Matrix has entered into a JV with Koperasi Kemajuan Tanah Negeri Johor Berhad to carry out a mixed development project in Kluang. Essentially, the transaction consists of an outright purchase of a land measuring 309.5 acres for a consideration of RM91.7m (staggered over the next 6 years) and that 100% of profits from the development will be fully recognised by Matrix. Recall that Matrix had previously entered into a JV with the said counterpart back in 2005 to acquire the land used for Bandar Sri Impian’s (BSI) development.

HLIB’s VIEW

Positive on the news. We are positive on the news as the land acquisition will provide room for Matrix to further expand its BSI township. As of 3Q19, only c.40% of estimated GDV within the BSI township remains undeveloped (RM1bn). This land acquisition (est. GDV RM1.2bn) will increase BSI’s undeveloped GDV to RM2.2bn, providing Matrix sustained contributions moving forward. The development will span over the following 7 years after its first launch.

Land acquisition. The purchase consideration of RM91.7m (RM6.8/sqft) is fair as it represents c.8% of estimated GDV. The land is located right beside its existing BSI township, increasing the total acreage of BSI from 694.1 acres to 1003.5 acres.

The development. Details on the project launches are still raw at this juncture but nonetheless, we can expect the first launching to occur sometime in 2021. We estimate the development will yield Matrix with a NPV of RM87m (increasing RNAV by 3.7%), assuming PBT margin of 20% at WACC of 10%. Our pro forma calculation implies net gearing will remain at 0.09x (as at 3Q19) after taking into account the initial deposit of RM10m required for the land.

Forecast. Unchanged as we expect contributions to take place only in 2022. Maintain BUY with a higher TP of RM2.25 (from RM2.17) based on unchanged 25% discount to RNAV of RM3 after imputing the GDV contributions from this transaction. 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 5.8% for FY19 and 6.5% for FY20, being one of the highest in the sector

Source: Hong Leong Investment Bank Research - 3 May 2019