Matrix reported 1HFY22 core PATMI of RM83.5m (-21.3% YoY) that were within expectations. Declared second tier first interim dividend of 3.0 sen (1QFY22: 2.0 sen; 2QFY21: 3.0sen) per share going ex on 21 Dec 2021. 1HFY22 cumulative dividend of 5.0 sen (representing 52% of payout ratio) was above our expectation (making up 45% of our forecast). 2QFY22 new sales came in at RM340.4m brought 1HFY22 sales to RM641.3m (53% of its full year target of RM1.2bn). We are expecting stronger 2HFY22 earnings from a higher progressive billings contribution in line with higher productivity. We maintain our earnings forecast but increase our dividend forecast of FY22 -24 by 12% to reflect higher payout moving forward. Maintain BUY with a higher TP of RM2.54 (from RM2.20) based on a lower discount of 25% (from 35%) of RNAV of RM3.39.

Within expectations. Matrix reported 2QFY22 core PATMI of RM51.8m (+63.4% QoQ, -31.0% YoY), which brought 1HFY22 core PATMI to RM83.5m (-21.3% YoY), making up 36% of our and 34% of consensus expectation. We deem the results inline as we are expecting a stronger 2HFY22 from a higher progressive billings contribution in line with higher productivity.

Dividend. Declared second tier first interim dividend of 3.0 sen (1QFY22: 2.0 sen; 2QFY21: 3.0sen) per share going ex on 21 Dec 2021. 1HFY22 cumulative dividend of 5.0 sen (representing 52% of payout ratio) was above our expectation (making up 45% of our forecast). To recap, Matrix has a dividend policy to distribute 40% of profit after tax.

QoQ. Despite longer number of days for lockdown in 2QFY22 vs 1QFY22, Matrix rebounded strongly by registering core PATMI growth of 63.4% on the back of higher revenue by 46.5% attributed to its expedited construction activities and new property launches.

YoY/YTD. Core PATMI declined (-31% YoY;-21.3% YTD) largely due to the loss of operations during lockdown period as well as lower contribution from its latest development series of Laman Sendayan 1 & 2 (currently at the early phases).

Sales and launches. 2QFY22 new sales came in at RM340.4m brought 1HFY22 sales to RM641.3m (53% of its full year target of RM1.2bn). 1HFY22 saw RM306m new launches from Laman Sendayan 3 & 4 as well as Tiara Sendayan 9. Management shared that newly launched Laman Sendayan 3 and Tiara Sendayan 9 were nearly 100% taken up. The company has GDV of c.RM1.2bn in the pipeline for launches in the 2HFY22. Unbilled sales stood at RM1.1bn (1.0x cover ratio).

Outlook. We believe earnings delivery should improve in 2HFY22 in tandem with looser restrictions. To recap, after MCO1.0 was lifted, Matrix operated its construction works at 120% capacity and able to catch up on its schedule within 6 months.

Forecast. We maintain our earnings forecast but increase our dividend forecast of FY22-24 by 12% to reflect higher payout moving forward.

Maintain BUY with a higher TP of RM2.54 (from RM2.20) based on a lower discount of 25% (from 35%) of RNAV of RM3.39 to reflect the higher dividend payout as well as stronger sales moving forward. 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- 6.8% for FY22-24, being one of the highest in the sector.

Source: Hong Leong Investment Bank Research - 26 Nov 2021