Yesterday, we came back from MATRIX’s briefing feeling neutral despite management’s optimism in achieving sales target of RM1.0b in FY17 backed by RM1.5b worth of launches, mainly because the bulk of its launches is skewed towards 2HCY16. Furthermore, the development timeline for its Puchong project remains fluid, still pending approval for higher density. Hence, 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.

FY17 sales target unveiled. Management remains optimistic with their outlook given that their projects have not shown any signs of slowing down as it recently registered a record high of RM805.5m in sales for 12M16, despite the challenging market conditions that have plagued the property market for the past 12-15 months. Hence, management is targeting a higher sales target of RM1.0b for FY17, backed by a pipeline of launches totalling to RM1.5b in CY16 concentrated in Bandar Sri Sendayan (BSS) and Taman Seri Impian (TSI). These projects are Sendayan Merchant Square 1 (RM59m), Hijayu 3 (GDV: RM188m), Hijayu Resort Homes (GDV: RM512m), Suriaman 2A (GDV: RM170m), Impiana Bayu (GDV: RM48m) and etc. Nonetheless, we are still keeping our conservative sales estimates of RM854m-RM748m for FY16-17E as we expect the property market to remain challenging in the near to midterm.

Puchong, targeting for higher density. Recall last year, MATRIX had acquired a parcel of land in Puchong (GDV: RM500m) with an existing development whereby the initial plan was to secure a density ratio of 90 units/acre from the current 60 units/acre as agreed by its vendor. However, should its vendor fail to secure the required higher density ratio, MATRIX would take charge of the applications process and management may try to convince the state government for a higher density ratio of 120 units/acre due to the project’s close proximity to LRT station. While we believe that it would be GDV-accretive should they be successful, we opine that the application process could take longer than expected and we do not expect any launches from its Puchong development until FY18.

Maiden overseas project. Management is excited with its maiden overseas development in Australia, which is a 52-unit 4-storey development in Carnegie, Melbourne (GDV: AUD30m), directly opposite SPSETIA’s development as it has received a great feedback from the market due to its close proximity to Monash University and public transportation access. However, no timeline has been set for the launch of this project as management is still in the midst of finalising the development plans.

Maintain MARKET PERFORM. We reiterate 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%. 

Source: Kenanga Research - 26 Feb 2016