1H18 CNP of RM97.4m came in below our, but broadly within street’s full-year, estimates, at 43%/46%. 1H18 property sales of RM644.7m are ahead of our target of RM1.1b for FY18. 3.25 sen dividend declared as expected. No changes to FY18-19E earnings. Cease coverage due to reallocation of resources (Previous Recommendation: MP; TP: RM2.12).

Below expectations. 1H18 NP of RM97.4m came in below our, but broadly within streets’ full-year estimates, at 43%/46%. The disappointment in earnings is due to slower-than-expected billings as revenue for 1H18 only made up 38% of our estimate. Positively, 1H18 property sales of RM644.7m made up 60% of our FY18E target of RM1.1b, which is proportionately ahead of expectations. Second interim dividend of 3.25 sen declared, bringing 1H18 dividend to 6.5 sen, on- track to meet our FY18 DPS of 10.9 sen.

Results highlight.1H18 NP saw a marginal decline of 1%YoY, despite an 11% drop in revenue, as the negative impact was cushioned by improvements in pre-tax margins to 35% (+3ppt). The improvement in margins was driven by better sales of ‘high-end’ residential products compared to its mid-range products. QoQ, 2Q18 NP grew 14% on the back of its revenue growth of 17% driven by better progressive billings from its residential and commercial properties.

Outlook. Its unbilled sales are at a record high of RM1.1b, providing another year of visibility. Amidst a challenging market, the company appears to be faring well considering its recent sales of RM349.6m in 2Q18, bringing its YTD sales to RM644.7m. Hence, we believe that our FY18 target of RM1.1b is highly achievable.

No changes to estimates. Post results, we make no changes to our estimates.

Cease Coverage. We cease coverage on MATRIX with immediate effect due toreallocation of resources. Our previous recommendation was MARKET PERFORM with a Target Price of RM2.12.

Source: Kenanga Research - 24 Nov 2017