The Highly Successful Bandar Sri Sendayan Township Contributes C.75% to Earnings Has a Remaining Landbank Worth RM4bn of GDV and the Commercial Segment Which Could Potentially Generate Over RM6bn Which Will Sustain Earnings Moving Forward. Matrix Continues to Set Foot in Projects Out of Seremban With Klang Valley Having 3 Projects in the Pipeline, a JV Development in Indonesia, and 2 Projects Remaining in Australia. We Maintain Our Forecasts and BUY Recommendation With An Unchanged RNAV-based TP of RM2.25.

We recently met up with management; below are the key takeaways:

Bandar Sri Sendayan (BSS). Contributing c.75% to earnings, the BSS township is Matrix’s bread and butter. The township has an ongoing GDV of RM2.2bn (418 acres) and a remaining landbank worth RM4bn (1k acres) to sustain earnings moving forward. Note that it hasn’t included the potential GDV for Sendayan Icon Park i.e. the commercial segment of the township which is estimated to be over RM6bn. Matrix will soon be launching its first condominium (c.6 storeys tall) with a GDV of less than RM100m in order to test the local market’s appetite for non-landed residential units. The township also has an IBS plant with a capacity of 700units/year and will soon be launching its first project made from IBS.

Building presence in Klang Valley. To recap, Matrix’s maiden launch in Klang Valley is Chambers, a high-rise serviced apartment located in KL which was launched back in 2018. Moving forward, Matrix will further establish its presence via high-rise launches in Puchong and Damansara Perdana in FY21, comprising of at least RM400m of GDV each. Another land located in Cheras is earmarked to launch in FY22 with details of the development to be finalised.

The Indonesian venture. The JV’s (Matrix stake: 30%) first project in Indonesia, Menara Syariah, comprises of two office blocks and a retail podium whereby one block is targeted for sale while the other may be leased out. The project is targeted to complete in 2021 with an estimated GDV of USD250m.

In the land down under. Following the success of M.Carnegie (Matrix’s first project in Australia) which was completed back in 2018 with a full take-up rate, the company now has two projects remaining in Australia. One of the projects (M. Greenvale) had its soft launch carried out in 2019 and is expected to be completed in 2021 with a GDV of AUD27.8m. Another project (M.St. Kilda) is still in the pipeline and is targeted to launch in 2021 with and estimated GDV of AUD80m. The project is a 12-storey mixed development located on 0.6 acres of land.

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 (RM260m), and Tiara Sendayan Precint 6 (RM153m).

Outlook. Earnings visibility will continue to be supported by new sales and unbilled sales of 1.2x cover. With regards to sales figures (1HFY20: RM665.6m), Matrix is well on track to meet its sales 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 6.7% for FY20 and 7.6% for FY21, being one of the highest in the sector.

Source: Hong Leong Investment Bank Research - 4 Feb 2020