Period

3Q15/9M15

Actual vs. Expectations

Matrix Concepts (MATRIX)’s 9M15net profit of RM176.4m accounts for 93% and 90% of our and consensus full-year estimates. However, we deem the performance as broadly within both our and consensus expectations as we are expecting a weaker 4Q15 given that MATRIX has enjoyed the accelerated recognition of its on-going residential and industrial projects prior to the implementation of GST.

In terms of sales, MATRIX has performed exceptionally well, recording total sales of RM612m for 9M15which accounted for 98% of our total estimates of RM625m.

On a separate announcement, MATRIX announced that they are changing their financial year-end from Dec-15 to Mar-16.

Dividends

3rd interim dividend of 3.5sen declared, as expected.

Key Results Highlights

YoY, 9M15 net profit of RM176.4m grew by 40% due to the strong growth in revenue of 25%, where the significant improvements are mainly due to accelerated recognition of its on-going residential and industrial properties (which generally command superior margins vs. residential and commercial properties) prior the implementation of GST. That said, the recognition of its industrial properties also lifted its EBITDA margin by 7ppt to 58%.

QoQ, 3Q15 net profit of RM31.1m still saw a marginal growth of 4% mainly due to a lower effective tax rate of 23% registered in 3Q15 vis-à-vis 28% in 2Q15.

Outlook

Its unbilled sales remain healthy at RM640.5m, sufficient to sustain the group for another 1–1.5 years, and we remain positive on MATRIX’s outlook, which is underpinned by strong demand for affordable housing within Greater Klang Valley.

Change to Forecasts

Following the change in financial year-end from Dec- 15 to Mar-16, we adjusted our FY15E sales and earnings higher to RM854.0m and RM243.0m factoring in 15 months of financial reporting.

Rating

MARKET PERFORM

Valuation

MARKET PERFORM maintained. We are reiterating our MARKET PERFORM call on MATRIX with an unchanged Target Price of RM2.46 with a discount of 30% to its FD RNAV of RM3.51. Our TP of RM2.46 implies FY16E PER of 7.5x which is still below its peers’ average of 8.4x. The assigned 30% discount to RNAV is the thinnest compared to the RNAV discount applied to the mid-cap peers averaging at 62%, due to its affordable landed residential offerings in Seremban (<RM500k). Furthermore, downside risk is limited given that at our TP of RM2.46, it still commands better yield of 6.0% vs. its peers’ average of only 5.5%

Risks

(i) Weaker-than-expected property sales, (ii) Higherthan- expected sales and administrative costs, (iii) Negative real estate policies, (iv) Tighter lending environments

Source: Kenanga Research - 18 Nov 2015