Period

1Q15

Actual vs. Expectations

Matrix Concepts (MATRIX)’s 1Q15 net profit of RM115.4m makes up 61.0% and 59.0% of our and consensus full-year estimates of RM190.0m and RM197.0m, respectively. However, we deem the results as broadly inline as we expect weaker subsequent quarters given that MATRIX has enjoyed the acceleration of the recognition of on-going residential and industrial projects prior to the implementation of GST.

Its property sales of RM156.8m for 1Q15 was also inline, making up 23.0% of our full-year sales estimate of RM697.0m.

Dividends

MATRIX declared first interim dividend of 4.25 sen, within our full-year expectations of 18.9 sen.

Key Results Highlights

YoY, 1Q15 net profit surged by 199.0% underpinned by a substantial improvement in revenue of RM317.6m (+136.0%) coupled with 8ppt expansion on its EBITDA margins to 59.0%. The improvements in revenue and EBITDA margins were mainly driven by the accelerated recognition of its on-going residential projects, i.e. Hijayu 1A, Hijayu 3D, and Impiana Bayu 1 coupled with a significant increase in revenue from its industrial properties, which generally commands better margins compared to residential and commercial properties.

QoQ, The sharp increase in 1Q15 net profit of 104.0% was largely due to the reasons mentioned above i.e. accelerated revenue recognition for its on-going residential and industrial properties. For 1Q15, its industrial property revenue makes up 30.0% of its total revenue of RM317.6m.

Outlook

As of 1Q15, its unbilled sales stand at RM392.0m providing at least one-year visibility.

Moving forward, we are still maintaining our sales estimates of RM697.0m which we believe is highly achievable, as management has planned RM1.1b worth of project launches in FY15 which consists of residential and commercial products, i.e. Bandar Sri Sendayan, (GDV: RM670.0m), Taman Seri Impian (GDV: RM206.0m), Residency SIGC (GDV: RM229.0m) of which 58.0% are residential products priced close to RM500.0k per unit excluding industrial land sales.

Change to Forecasts

No changes to our FY15-16E net profits, as we expect weaker quarters ahead, given that MATRIX has accelerated a bulk of its revenue recognition from its ongoing residential and industrial properties.

Rating

UNDER REVIEW

Valuation

Our CALL/TP is UNDER REVIEW, pending an analysts’ briefing today. Our previous recommendation was MARKET PERFORM and Target Price of RM3.05 (exbonus, RM2.62) based on 30.0% discount to its FD RNAV (thinnest under our coverage vs. sector average of 53.0%). Note that our FD RNAV includes new GDV replenishment of RM1.2b. Also, our applied FD RNAV discount of 30.0% for MATRIX is also one of the thinnest within our coverage (range: 30.0%-72.0%, average: 53.0%).

Risks

Weaker-than-expected property sales

Higher-than-expected sales and administrative costs

Negative real estate policies

Tighter lending environments

Source: Kenanga Research - 13 May 2015