Post the analysts’ briefing, we are reassured with MATRIX’s long-term prospects. MAHSING’s recent participation in the Greater Klang Valley region (Seremban) could potentially benefit MATRIX given that the latter’s land is located closer to Klang Valley. Hence, we are maintaining our OUTPERFORM call with a higher Target Price of RM3.48 based on unchanged 20% discount on a higher FD RNAV of RM4.35 as we build-in RM2.0b worth of GDV replenishments. We expect some landbanking newsflows from MATRIX over the next six months given its managements’ confidence in securing some land acquisitions in the near-term. Our TP of RM3.48 implies a decent net yield of 4.8% and reasonable FY14-15E PER of 9.4x-8.3x which will be on par with its mid-cap peers averages of FY14-15E PER of 9.0x-8.1x FY14-15E PER and 4.5% yield.

Sales target remains intact. In the briefing, management indicated that they are targeting to emulate its FY13’s sales record of c.RM750m in FY14. Based on its total planned launches amounting to RM819.3m excluding land sales (higher than the previously guided RM763.0m), we think that management’s target remains realistic should they are able to record 75% take up for its property launches coupled with a few more sizeable land sales. To recap, MATRIX has already launched RM409m worth of properties via Hijayu 1A, Sendayan Metropark 2, and Hijayu 3A Phase 1 and 2 in 1H14, registering property sales of RM272m and a land sale of RM18.9m. Moving into 2H14, MATRIX intends to launch another RM410m of projects in 4Q14, i.e. Hijayu 3A Phase 3 and 4 (GDV: RM180.0m), Impiana Height (GDV: RM85.6m) and Residency SIGC (GDV: RM144.7m).

Earnings estimates maintained. We believe that MATRIX will be able to sustain similar 2Q14 performance in subsequent quarters given that billings for some of its projects have already picked up pace. Its unbilled sales of RM434.7m would also provide at least one-year visibility for the group. Hence, we are maintaining our FY14-15E earnings of RM167.2m and RM190.2m underpinned by strong billings and sales take-up rates.

On the lookout for landbanks. As per our previous reports, MATRIX has been actively looking to replenish its industrial landbank in Seremban and we gather they are already in the process of locking in some acquisitions over the next 3-6 months. The company prefers to keep a relatively low net gearing level. Assuming that the company increases its gearing from its current net cash position of 0.04x to 0.30x, this should raise at least RM210m for landbanking. As an illustration, MAHSING’s recently acquired 960ac land in Rantau, Seremban for RM359.6m (RM8.60psf) and the project’s implied GDV is RM7.5b which implies that land cost is about 5% of GDV. Based on similar dynamics, we believe that MATRIX can replenish another RM4.2b new GDV if they spend RM210 on landbanking in Seremban. This translates to an 18% increase in our FD RNAV to RM4.73. While this appears compelling, it will be challenging to hit such replenishment rates; in the last 12 months, the group has acquired three parcels of lands, with two parcels adjacent to Bandar Sri Sendayan and another one in the Klang Valley which implies a combined GDV of RM1.8b.

Outperform maintained. We are reiterating our OUTPERFORM recommendation on MATRIX with a higher Target Price of RM3.48 (previously, RM3.20) as we revised our FD RNAV higher by 9% to RM4.35 with an unchanged discount of 20%, as we have conservatively factored in RM2.0b worth of GDV replenishments into our FD RNAV. We believe this is realistic based on its previous landbanking track records whereby they managed to replenish RM1.8b worth of GDV in the last 12 months. Our TP of RM3.48 implies a decent net yield of 4.8% and reasonable FY14-15E PER of 9.4x-8.3x, which will be on par with its mid-cap peers averages of FY14-15E PER of 9.0x-8.1x FY14-15E PER and 4.5% yield.

Source: Kenanga