MATRIX’s core net profit (CNP) of RM255.2m was within our, but beat consensus, full-year expectations, accounting for 104% and 112% of respective estimates. A 4.4 sen interim dividend was declared bringing its full-year dividend to 19.4 sen, higher than our expectations of 18.0 sen. Property sales of RM974.2m beat our estimates by 14%. MARKET PERFORM maintained, Target Price unchanged at RM2.46.

15M16 core earnings of RM255.2m (excluding fair value gain of RM6.0m) was inline with our, but above consensus, estimates, at 104% and 112%, respectively. While its performance seems to beat consensus expectation, we believe that consensus’ FY16 estimates only accounted for 12 months performance instead of 15 months.

YoY not comparable due to change in year-end. QoQ, 5Q16 CNP rose by 30% on the back of 49% growth in revenue despite a slight dip in pre-tax margin of 34% (-1ppt) and higher effective tax rate of 32% (+6ppt). The surge in revenue was mainly driven by better billing progress from on-going projects, i.e. Hijayu series, Impiana series and Merchant Square. Its net gearing crept up to 0.14x from 0.09x previously.

Outlook. 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. Currently, we are keeping our conservative sales estimates of RM748m for FY17 as we expect the property market to remain challenging in the near to mid term.

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 13% premium to its mid-cap peers’ average of 6.3x. The 30% discount is the narrowest compared to the RNAV discount applied to mid-cap peers that averages at 64%, due to its affordable landed residential offerings in Seremban (<RM500k). Furthermore, its FY17E dividend yield of 6.1% remains decent as compared to its peers average of 5.2% Downside risks to our call include: (1) Weaker-than-expected property sales, (2) Higher-than-expected sales and administrative costs, (3) Negative real estate policies and (4) Tighter lending environments 

Source: Kenanga Research - 20 May 2016