Period

4Q16/12M16

Actual vs. Expectations

Matrix Concepts (MATRIX)’s 12M16 net profit of RM213.2m came in within our full-year estimate accounting for 88% our 15-month full-year estimates. While its performance seems to beat streets’ expectations at 101% of the full-year estimate, we reckon that the street is only accounting for only 12-month period for FY16. To recap, MATRIX announced a change in financial year-end from Dec-15 to Mar-16, during its 3QCY15 results announcement.

In term of sales, MATRIX has performed exceptionally well recording total sales of RM805.5m for 12M16, accounting for 94% of our total estimates of RM854.0m.

Dividends

4th interim dividend of 3.75 sen declared, bringing its 12M16 dividend to a total of 15.0 sen (7.4% yield), and we are expecting a total dividend of 17.9 sen for 15M16.

Key Results Highlights

YoY, 12M16 net profit grew by 17% underpinned by revenue growth of 17%, while EBITDA margin improved by 2ppt to 57%. The commendable revenue growth was mainly driven by the steady billings from its on-going residential and commercial projects in Bandar Sri Sendayan and Taman Seri Impian. In terms of sales and administrative costs, it saw a significant increase by 38% to RM111.1m, which was not surprising under current market circumstances.

QoQ, 4Q16 net profit was up by 19% due to similar reasons above.

Outlook

Its unbilled sales remain healthy at RM633.2m, sufficient to sustain the group for another 1–1.5 years. MATRIX’s outlook remains intact, driven by strong demand for affordable housing within Greater Klang Valley. To recap, MATRIX has planned to launch c.3,000 units of low-cost housing in Seremban with a price tag <RM300k to cater for the need for such products.

Change to Forecasts

No change to our FY16E earnings as 5QFPE16 is expected to be weak due to the festivities period, while we revised our FY17E earnings higher by 6.7% as we speed up our progressive billings recognition for its ongoing projects. We have kept our FY16-17E sales assumptions unchanged.

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 FY17E FD PER of 7.1x, which already represents an 18% premium to its mid-cap peers’ average of 6.0x.

The 30% discount is the narrowest compared to the RNAV discount applied to the mid-cap peers that averages at 62%, due to its affordable landed residential offerings in Seremban (<RM500k).

Currently, they have 57.3m of warrants outstanding with a strike price of RM2.40 trading at a premium of 17%.

Risks

(i) Weaker-than-expected property sales, (ii) Higher-thanexpected sales and administrative costs, (iii) Negative real estate policies, (iv) Tighter lending environment.

Source: Kenanga Research - 25 Feb 2016