Management will continue to focus on launching affordably priced products to cater to the market conditions. Notably, the launches have been well received with the most recent one in 2QFY21 being fully booked on the first day of launch. In Indonesia, the initial guidance of a 6-month delay in the project may potentially prolong given the condition of the ongoing outbreak. In terms of costs incurred, the project has minimal running costs and will be rather unaffected by the delay. Matrix will operate construction works at 115% capacity (by working overtime) to catch up on its schedule by year-end. As such, earnings from progressive billings should normalise on a full-year basis. Maintain forecasts and BUY with an unchanged TP of RM2.11 based on 35% discount to RNAV of RM3.24.

1QFY21 recap. To recap, Matrix reported 1QFY21 core PATMI of RM31.1m (-41.3% QoQ, -38.1% YoY) which 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. The sales achieved were rather strong as it was supported by conversions from bookings carried out pre-MCO. With regards to launches, RM258.5m worth of products was launched.

Industrial land. On the industrial properties, only 41.4 acres of land remain in Sendayan Tech Valley 2 & 3 (out of 505 acres total) as of 1QFY21. Management however does not plan on launching new industrial properties despite it commanding stronger margins as residential properties actually provide superior GDV/acreage. In fact, the previous pending launch of an industrial land was converted into residential land use.

Foreign projects. In Australia, M.Greenvale has achieved a take-up of c.60% as at Aug 2020 and is expected contribute towards earnings in FY22. Meanwhile, operations in Indonesia remain halted due to the Covid-19 outbreak. We note that the initial guidance of a 6-month delay in the project may potentially prolong given the condition of the ongoing outbreak in Indonesia. To recap, the initial completion date was targeted for 2021. In terms of costs incurred, the project has minimal running costs and will be rather unaffected by the delay.

Outlook. Management will continue to focus on launching affordably priced products to cater to the market conditions. 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 the first day of launch. 4QFY21 may also see the launch of a project in Cheras (GDV of over RM300m), dependant on the market’s appetite. Earnings visibility will continue to be supported by new sales and unbilled sales of 1x cover (RM1.2bn). Matrix will operate construction works at 115% capacity (by working overtime) to catch up on its schedule by year-end. As such, earnings from progressive billings should normalise on a full-year basis.

Forecast. Unchanged.

Maintain BUY with an unchanged TP of RM2.11 based on 35% discount to RNAV of RM3.24. 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 6.5% for FY21 and 6.9% for FY21, being one of the highest in the sector.

Source: Hong Leong Investment Bank Research - 2 Sept 2020