To recap, Matrix reported 4QFY20 core PATMI of RM52.9m (-19% QoQ, -19.7% YoY), bringing FY20 core PATMI to RM231.5m (+6.4% YoY). RM1,041.7m worth of GDV will be launched in FY21, with 87% stemming from its key township at BSS while the rest from BSI. Menara Syariah in Indonesia is expected to face an approximate 6-month delay on its initial targeted completion date in 2021. FY21 sales is set at RM1.1bn which we believe will be achievable (despite market conditions) as we note that over RM700m worth of property bookings was made during the MCO period. Maintain forecasts and BUY rating with an unchanged TP of RM2.06 based on unchanged 30% discount to RNAV of RM2.94.

We Attended a Virtual Briefing With Matrix’s Management. Below Are the Key Takeaways.

4QFY20 recap. To recap, Matrix reported 4QFY20 core PATMI of RM52.9m (-19% QoQ, -19.7% YoY), bringing FY20 core PATMI to RM231.5m (+6.4% YoY). We view this positively as the quarterly earnings did relatively better in comparison to its property peers (which registered much wider decreases). FY20 sales came in at RM1bn, short of the initial RM1.3bn target. Management has clarified that the effective tax rate was higher in 4QFY20 largely due to a conservative approach towards deferred tax asset realisation.

Pipeline launches. We understand that RM1,041.7m worth of GDV will be launched in FY21, with 87% stemming from its key township at Bandar Sri Sendayan while the rest are from Bandar Sri Impian. We expect the high-rise projects in Klang Valley (in Puchong and Damansara Perdana) to only be launched earliest in FY22, depending on market conditions.

Menara Syariah, Indonesia. Prior to the halt in operations from Covid-19, the Menara Syariah Twin Towers was ahead of schedule with piling works done. However, an approximate 6-month delay in completion (subject to health advisory by the Indonesian authorities) is now expected as work on-site has yet to resume. To recap, the initial completion date was targeted for 2021. Management has clarified that the delay is not expected to cause losses for Matrix. Sales and marketing activities will be carried out once construction resumes.

Outlook. FY21 sales is set at RM1.1bn which we believe will be achievable (despite market conditions) as we note that over RM700m worth of property bookings was made during the MCO period. Earnings visibility will continue to be supported by new sales and unbilled sales of 0.8x cover (RM1bn). To compensate for the slowdown of construction progress during MCO, construction works are being ramped up to get it back on track (targeted to catch up within 6 months). In terms of dividends, we conservatively expect Matrix to be able to pay at least 10.5 sen per share for FY21 which translates to a yield of 5.7%. Furthermore, Matrix’s healthy balance sheet of 0.07x net gearing as of FY20 will provide the buffer to sustain through this challenging environment.

Forecast. Unchanged. Maintain BUY with an unchanged TP of RM2.06 based on a 30% discount to RNAV of RM2.94. 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 5.7% for FY21 and 6.8% for FY22, being one of the highest in the sector.

Source: Hong Leong Investment Bank Research - 13 Jul 2020