To recap, Matrix reported 2QFY20 core PATMI of RM58.7m (+7.7% QoQ, +11% YoY), bringing 1HFY20 core PATMI to RM113.3m (+9.9% YoY). Management has indicated that the launch for the Iconic Twin Towers project is slated to take place in Dec 2019. Occupying 1.4 ha of land, the project will command a total estimated GDV of USD500m. We understand that RM485.6m worth of GDV will be launched in 2HFY20, bringing the full year launch target to RM1.2bn. We maintain our forecasts and BUY recommendation with an unchanged RNAV based TP of RM2.25.

2Q20 recap. To recap, Matrix reported 2QFY20 core PATMI of RM58.7m (+7.7% QoQ, +11% YoY), bringing 1HFY20 core PATMI to RM113.3m (+9.9% YoY). 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 while unbilled sales remained healthy at RM1.2bn, representing a healthy cover ratio of 1.2x.

Maiden launch in Indonesia. Management has indicated that the launch for the Iconic Twin Towers project is slated to take place in Dec 2019. Occupying 1.4 ha of land, the project will command a total estimated GDV of USD500m (i.e. USD250m per tower) which is targeted to be sold en-bloc and/or leased out, depending on the market condition.

The remaining land. Recall that the JV (Matrix stake: 30%) had acquired a total of 3.6 ha of land within the Islamic Financial District (IFD) of PIK2, which is part on an initiative by the Indonesian Government to champion the Islamic finance discipline. The remaining 2.2 ha will be reserved for future development, which will be funded via the proceeds from the Iconic Twin Towers; management does not foresee the need to further raise funds. We gather that the land cost was c.50% of the PIK1 prime land (IDR20m psqm compared to IDR40m psqm) which is largely due to the JV partner BKS, being jointly owned by Salim Group and Agung Sedayu Group (master developer of PIK 2). Moving forward, the JV is expected to acquire the remaining land of the IFD which encompasses a total of 12 ha of land within the PIK 2.

FY20 launches. We understand that RM485.6m worth of GDV will be launched in 2HFY20, bringing the full year launch target to RM1.2bn. The remaining launches will be located in the BSS township i.e. Hijayu Aman P2 (RM72.6m), Hijayu Residence Phase 1, and Tiara Sendayan Precint 6.

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 as the briefing yielded no major surprises.

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

Source: Hong Leong Investment Bank Research - 22 Nov 2019