Matrix reported 2QFY21 core PATMI of RM75.1m (141.7% QoQ, 37.6% YoY), bringing 1HFY21 core PATMI to RM106.1m (-6.3% YoY). The improved progressive earnings recognition in 2QFY21 can be largely attributed to the company carrying out construction works at c.120% capacity to make up the loss of operations during the MCO period by year-end. 1HFY21 sales of RM602m (50% of full year target) was recoded while launches worth RM353m were carried out. Maintain forecast and BUY rating with an unchanged TP of RM2.11 based on 35% discount to RNAV of RM3.24.

Within expectations. Matrix reported 2QFY21 core PATMI of RM75.1m (141.7% QoQ, 37.6% YoY), bringing 1HFY21 core PATMI to RM106.1m (-6.3% YoY). The results were in-line with expectations forming 51.7% and 51.2% of our and consensus full year forecasts respectively. No EIs were excluded from the reported earnings.

Dividend. Declared second interim dividend of 3.0 (2QFY20: 3.0) sen per share going ex on 23 Dec 2020, bringing 1HFY21 dividends to 5 sen per share.

QoQ/YoY. 2QFY21 core earnings rose 141.7%/37.6% to RM75.1m on the back of improved progressive earnings recognition and a higher margin product mix. Notably, the improved progressive earnings recognition can be largely attributed to the company carrying out construction works at c.120% capacity to make up the loss of operations during the MCO period by year-end.

YTD. 1HFY21 core earnings fell marginally by -6.3% to RM106.1m largely due to the loss of operations during the MCO period in 1QFY21 but was partially mitigated by a higher margin product mix.

Strong sales recorded. 2QFY21 new sales came in at RM252m, bringing 1HFY21 sales to RM602m which represents 50% of the full year target (RM1.1bn). With regards to launches, 2QFY21 launched RM95m worth of products bringing 1HFY21 launches to RM353m.

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 0.9x cover (RM1.1bn). We remain positive on management’s efforts to make up for the loss of operations during the MCO period.

Forecast. Unchanged.

Maintain BUY with 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 6.3% for FY21 and 6.8% for FY21, being one of the highest in the sector.

Source: Hong Leong Investment Bank Research - 19 Nov 2020