Matrix reported 9MFY20 core PATMI of RM178.6m (+17.7 % YoY), within expectations. 3QFY20 core PATMI improved largely due to a better margin product mix (i.e. industrial and commercial land sale recognition). 3QFY20 new sales came in at RM280.9m, bringing 9MFY20 sales to RM946.5m which represents 73% of the full year target of RM1.3bn. Management remains confident on achieving the full year target even after taking into account the potential COVID-19 impact towards sales. Earnings visibility will continue to be supported by new sales and unbilled sales of 1.2x cover (RM1.2bn). We maintain our forecasts and BUY recommendation with an unchanged RNAV based TP of RM2.25.

Within expectations. Matrix reported 3QFY20 core PATMI of RM65.3m (+ 11.2% QoQ, +34.4% YoY), bringing the 9MFY20 amount to RM178.6m (+17.7% YoY) which formed 75.9% and 78.3% of our and consensus full year forecasts, respectively. We deem this within expectations as 3QFY20 will likely be the strongest quarter from the recognition of higher margin products (i.e. industrial and commercial land sale recognition) and expect margins to normalise in 4QFY20. No EIs were excluded from the reported earnings.

Dividend. Declared second interim dividend of 3.0 (3QFY19: 3.0) sen per share going ex on 26 Mar 2020, bringing YTD dividend to 9.0 sen per share.

QoQ/YoY. 3QFY20 revenue remained relatively flat (-1.3%/-2.3%) at RM279m. On the other hand, core PATMI improved +11.2%/+34.4% to RM65.3m (from RM282.7m/RM285.7m) from a better margin product mix (industrial and commercial land sale recognition).

YTD. Revenue rose +5.4% to RM810.2m (from RM769m) on the back of higher revenue recognition from progressive billings. Similarly, core PATMI improved 17.7% to RM178.6m (from RM151.7m) in tandem with revenue coupled with a higher margin product mix.

On track to meet sales target. 3QFY20 new sales came in at RM280.9m, bringing 9MFY20 sales to RM946.5m which represents 73% of the full year target of RM1.3bn. Management remains confident on achieving the full year target even after taking into account the potential COVID-19 impact towards sales. Earnings visibility will continue to be supported by new sales and unbilled sales of 1.2x cover (RM1.2bn).

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 6.6% for FY20 and 7.4% for FY21, being one of the highest in the sector.

Source: Hong Leong Investment Bank Research - 21 Feb 2020