During a briefing, Matrix’s management reaffirmed that although its dividend payout ratio in 1Q15 was only at 16.8%, its full-year payout ratio will remain at a minimum of 40%. Maintain BUY, with a MYR3.65 TP (12% upside). While new sales in April will likely be weak from the GSTimpact, full-year sales should be on track to meet its target of MYR600m for the property development segment.

• Consistent dividend payout. Matrix Concepts (Matrix) announced a 4.25 sen DPS despite its bumper earnings in 1Q15, which translates to only a 16.8% payout ratio (its quarterly payout ratio is typically around 35-40%). However, management has reaffirmed that the full-year dividend payout ratio will be kept at a minimum of 40%, and any upside in earnings (and hence, dividends) would be a bonus to shareholders.The indication is in line with our forecast.
• Sector earnings trend. Although Matrix’s 1Q15 earnings were partly lifted by a higher contribution from industrial land sales, the quarter also saw accelerated billings from property development as the company completed more properties before the goods and services tax (GST) kicked in to minimise the impact on its cost components. We expect to see the same trend for other developers when they release their 1Q15 numbers this month. Generally, it should be easier for township developers to speed up construction works compared with those building high-rise projects.
• On track to meet sales target. Matrix’s new sales in April will likely be weak as the impact of cooling measures and the GST work their way through. The company’s sales team has, therefore, stepped up efforts to closely follow up with a targeted group of potential buyers to market the unsold units in the recently-launched phases. Despite the slow period, we believe management’s full-year target of MYR600m in new sales from the property development segment can be achieved, given its MYR1bn value of new launches for the year – which mainly compriseaffordable landed houses and some shop lots in Bandar Sri Sendayan and Taman Sri Impian, where demand should be rather resilient.
• Maintain BUY. We maintain BUY on Matrix and a MYR3.65 TP, based on a 15% discount to its RNAV. The company’s AGM will be held in June to approve the recently-announced bonus issue and warrants exercise.