Matrix reported 1HFY20 core PATMI of RM113.3m (+9.9% YoY), within expectations. 1HFY20 core PATMI improved in tandem with revenue largely attributed to higher revenue recognition from the BSS township and Chambers, KL. 2QFY20 new sales came in at RM346.4m, bringing 1HFY20 sales to RM665.6m which represents 51.2% of the full year target of RM1.3bn. Meanwhile, unbilled sales remained healthy at RM1.2bn, representing a 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 2QFY20 core PATMI of RM58.7m (+7.7% QoQ, +11% YoY), bringing 1HFY20 core PATMI to RM113.3m (+9.9% YoY). We deem this within expectations as it forms 48.1% and 48.2% of our and consensus full year forecasts, respectively.

Dividend. Declared second interim dividend of 3.0 (2QFY19: 3.25) sen per share going ex on 19 Dec 2019, bringing YTD dividend to 6.0 sen per share.

QoQ/YoY. 2Q19 revenue increased 13.8%/11.6% to RM282.7m largely due to higher progressive billings from Chambers, KL. Subsequently, core PATMI increased 7.7%/11% to RM58.7m in tandem with revenue which was marginally dragged by a lower margin product mix.

YTD. Revenue rose 9.9% to RM531.2m (from RM483.4m) on the back of higher revenue recognition from the BSS township and Chambers, KL. Similarly, core PATMI improved 9.9% to RM113.3m (from RM103.1m) in tandem with revenue.

Strong sales continue. 2QFY20 new sales came in at RM346.4m, bringing 1HFY20 sales to RM665.6m which represents 51.2% of the full year target of RM1.3bn. Meanwhile, unbilled sales remained healthy at RM1.2bn, representing a healthy cover ratio of 1.2x.

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 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 6.7% for FY20 and 7.6% for FY21, being one of the highest in the sector.

Source: Hong Leong Investment Bank Research - 21 Nov 2019