1Q18 CNP of RM45.6m came in within expectations, accounting for 20% of both our and street’s full-year estimate while its 1Q18 property sales of RM295.1m was also in-line with our and management’s FY18E target of RM1.0b. Single-tier dividend of 3.25sen was declared, as expected. No changes to earnings. We await further updates pending its upcoming analysts’ briefing. Maintain MARKET PERFORM with an unchanged Target Price of RM2.65.

Inline. MATRIX’s 1Q18 Core Net Profit (CNP) of RM45.6m is within expectations, accounting for 20% of both our and street’s full-year estimates, respectively. Its 1Q18 property sales of RM295.1m is within our and management’s target of RM1.0b for FY18. Single-tier interim dividend of 3.25 sen was declared representing a pay-out ratio of 41% from its net profits), making up 22% of our FY18E NDPS of 14.7sen, as expected.

Results highlight. 1Q18 CNP was down by 17% YoY, underpinned by revenue decline of 12% due to lower stages of completion of on-going projects, which resulted in lower progressive billings. That aside, its financing cost also saw a sharp increase by 196% to RM2.2m. QoQ, 1Q18 CNP grew 17% on the back of the improvement in revenue (+7%) from higher billings and also improvements in pre-tax margins driven by lower financing costs (-47%).

Outlook. Its unbilled sales number remains healthy at RM933.3m, providing another year of visibility. Amidst a challenging market, the company appears to be faring well considering its planned launches worth RM1.4b for FY18, which comprise of very digestible affordable housing segment priced below RM500.0k per unit. Thus, we believe that MATRIX will be able to replicate its RM1.0b sales performance for FY18 although we hope to get more clarity from management pending its analysts’ briefing (briefing details TBD).

No changes to estimates, pending analysts’ briefing. Post results, we make no changes to our estimates as we await its quarterly analysts’ briefing.

MARKET PERFORM. We maintain our MARKET PERFORM recommendation with an unchanged Target Price of RM2.65. Our discount factor of 25% applied to its FD RNAV of RM3.52 is the lowest amongst developers under our coverage. At our TP, the stock commands an average FY18E PER of 7.1x, which is higher than smallmid cap developers’ ((<RM3b mkt cap) average of 6.9x. In terms of FY18E dividend yield, it offers 5.3% returns which we think is decent considering a developer’s riskier profile against sizeable MREIT where average net yields are at 5.0%

Downside risks to our call include: (i) weaker/stronger-than-expected property sales, (ii) higher/lower-than-expected sales and administrative costs, (iii) changes in real estate policies, and (iv) changes in lending environment.

Source: Kenanga Research - 25 Aug 2017