Matrix’s 1QFY21 core PATMI of RM31m (-41.3% QoQ, -38.1% YoY) were above expectations due to better than expected contributions from its operations during MCO coupled with expectation of stronger quarters ahead. 1QFY21 new sales came in at RM350.3m, representing 32% of the full year target of RM1.1bn. We increase our FY21 earnings forecast by +4.6% as we impute higher progressive billings recognition while tweaking our FY22 earnings forecast downwards by -5.4% as we were previously too bullish on the margins in FY22. We introduce FY23 earnings forecast at RM253.2m. Maintain BUY with a higher TP of RM2.11 (from RM2.06) based on 35% discount to RNAV of RM3.24.

Slightly above expectations. Matrix reported 1QFY21 core PATMI of RM31.1m (- 41.3% QoQ, -38.1% YoY), which formed 16% of both our and consensus full year forecasts. We deem it slightly above expectations due to better-than-expected contributions from its operations during MCO coupled with expectation of stronger quarters ahead. No EIs were excluded from the reported earnings.

Dividend. Declared first interim dividend of 2.0 (1QFY20: 3.0) sen per share going ex on 23 Sep 2020.

QoQ/YoY. 1QFY21 fell -65.7%/-29.6% to RM162m largely due to operating activities being impacted by the MCO. Subsequently, core PATMI fell -41.3%/-38.1% to RM31.1m in tandem with revenue coupled with unavoidable operating costs incurred during MCO.

Strong sales recorded. 1QFY21 new sales came in at RM350.3m, representing 32% of the full year target of RM1.1bn. With regards to launches, RM258.5m worth of products was launched.

Outlook. Given the current market conditions, management continues to focus its efforts on launching affordably priced products e.g. Laman Sendayan 1 which consists of 1 & 2 storey terrace houses priced below RM500k per unit. Notably, the launches have been well received with the most recent one in 2QFY21 (i.e. first phase of Laman Sendayan) being fully booked on first day of launch. Earnings visibility will continue to be supported by new sales and unbilled sales of 1x cover (RM1.2bn). The company’s prospects look promising as it recorded a relatively decent quarter despite being hit by the MCO. Furthermore, we note that Matrix plans to operate construction works at 115% capacity (by working overtime) to catch up on its schedule by year end. We remain positive on management’s efforts as we note that the past two months were on track whereby construction works have been going close to 120%.

Forecast. We increase our FY21 earnings forecast by +4.6% as we impute higher progressive billings recognition while tweaking our FY22 earnings forecast downwards by -5.4% as we were previously too bullish on the margins in FY22. We introduce FY23 earnings forecast at RM253.2m

Maintain BUY with a higher TP of RM2.11 (from RM2.06) based on 35% discount to RNAV of RM3.24 as we recalibrate our valuation to reflect the changes in forecast coupled with the rollover of valuation. 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 6.3% for FY21 and 6.8% for FY21, being one of the highest in the sector.

Source: Hong Leong Investment Bank Research - 27 Aug 2020