News  Last Friday, MATRIX proposed a 1-for-2 bonus issue.

 Concurrently, MATRIX also announced the completion of the land acquisition in Labu measuring 236.9 acres from Koperasi Sendayan Labu Seremban Bhd for RM47m, which was announced in Jul-2013.

Comments  We are positive on the proposed 1-for-2 bonus issue corporate exercise as it rewards shareholders and it also improves the stocks liquidity.

 Pending Bursa and shareholders’ approvals, the bonus issue is expected to be completed by 3Q14. Post-bonus, the share base will increase by 50% to 451.8m shares. Hence, the current share price will also be adjusted from RM4.11 to RM2.74, while our TP will be adjusted accordingly from RM4.80 to RM3.20.

Outlook  MATRIX has planned new residential and commercial project launches in FY14 with GDV close to RM700m with an average selling price of RM500k for its landed residential properties targeted at Klang Valley home buyers. This excludes some RM416m worth of ‘ready for sale’ or completed projects, of which a major bulk is the STV industrial lots.

 In terms of landbanking, they are on the lookout for more land in Seremban and we do expect some land deals to take place this year given their light balance sheet.

Forecast  No changes to our earnings estimate.

Rating Maintain OUTPERFORM

 We continue to like MATRIX for its (i) strong affordable housing market exposure, which will continue to enjoy resilient demand, (ii) low land cost, which provides them a margin edge, and (iii) industrial property exposure in Seremban, which is enjoying a boom given its proximity to the Klang Valley.

Valuation  No changes to our TP of RM4.80 (ex-bonus RM3.20) based on 20% discount to its fully diluted RNAV of RM6.00.

Risks to Our Call Unable to meet sales target.

 Delays in property launches.

 Sharp escalation of raw material prices.

Source: Kenanga