Matrix reported 1QFY20 core PATMI of RM54.5m (-10.9% QoQ, +8% YoY) came in within expectations. Core PATMI decreased -17,2% QoQ to RM54.5m in tandem with revenue coupled with favourable sales mix in the preceding quarter. Core PATMI increased 8.8% YoY in tandem with revenue. 1QFY20 new sales came in at RM157.7m while unbilled sales remained healthy at RM1.2bn, representing a healthy cover ratio of 1.2x. We maintain our forecasts and BUY recommendation with an unchanged RNAV-based TP of RM2.25.

Within expectations. Matrix reported 1QFY20 core PATMI of RM54.5m (-10.9% QoQ, +8% YoY), forming 24% and 23% of our and consensus full year forecasts, respectively.

Dividend. Declared first interim dividend of 3.0 (1QFY19: 3.25) sen per share, going ex on 19 Sep 2019.

QoQ. 1Q19 revenue decreased -10.9% to RM248.5m (from RM278.9m) largely due to lower progressive billings. Core PATMI decreased -17.2% to RM54.5m (from RM65.9m) in tandem with revenue coupled with favourable sales mix in the preceding quarter.

YoY. Revenue increased 8.0% from RM230m largely attributed to higher progressive billings recognition from projects in Bandar Sri Sendayan and Bandar Sri Impian. Consequently, core PATMI increased 8.8% in tandem with revenue.

Strong sales continue. 1QFY20 new sales came in at RM319.2m, representing 25% of the full year target of RM1.3bn. Meanwhile, unbilled sales remained healthy at RM1.2bn, representing a healthy cover ratio of 1.2x.

Greenvale, Australia in the pipeline. Matrix will be launching its Greenvale project sometime by 2HFY20, with an estimated GDV of AUD24m. The project will consist of 70 residential lots available for sale on its own, spanning over 10 acres. We note that that the estimated GDV has not taken into account the additional profit should buyers opt to use Matrix’s partnered home builder.

Outlook. Earnings visibility will continue to be supported by new sales and unbilled sales of 1.2x cover. We understand that over RM1.35bn (ex-Australia) worth of GDV will be launched in FY20. With regards to sales target, management has decided to set a flat target of RM1.3bn for FY20.

Forecast. Unchanged. Maintain BUY with an unchanged TP of RM2.25 based on unchanged 25% discount to RNAV of RM3.00. 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 6.8% for FY20 and 7.7% for FY21, being one of the highest in the sector.

Source: Hong Leong Investment Bank Research - 30 Aug 2019