• Maintain BUY and MYR1.75 TP, 22% upside and 7% FY24F (Mar) yield. Despite the temporary hiccup in construction progress due to the shortage of foreign workers, we continue to like Matrix Concepts for its exposure to landed affordable housing, solid balance sheet, steady earnings and dividend payout. We expect the upcoming 4QFY23 results to be somewhat flat QoQ. As foreign workers continue to come in over the next few months, construction works should be in full swing from Jul 2023 after necessary training is provided.

• More foreign workers have arrived. Recall, MCH’s results have been negatively affected due to the shortage of foreign workers post pandemic. We understand that many of the workers have just arrived this month, in line with management’s guidance, and the remaining 20% will progressively come in over the next two months. Worker requirements at sites are already fulfilled, and construction progress should reach “normalised” levels from Jul 2023.

• Expect 4QFY23 results to be flat QoQ. MCH’s property sales in 4QFY23 should be on track to hit full-year target of MYR1.3bn (9M sales: MYR1bn). However, given the timing of the arrival of foreign workers, we expect its results in 4QFY23F and 1QFY24F to be mediocre. Full year FY23F net profit will likely achieve MYR205-210m, flat from FY22. Nevertheless, despite the minimal earnings growth, the company is expected to maintain its attractive dividend payout of 50%, suggesting a 2.5 sen final dividend. Our estimated full-year DPS of 8.5 sen (8.3 sen in FY22) represents a dividend yield of 6%.

• Minimal earnings adjustments. We fine-tune our FY24F-25F earnings given the timing of work progress, and progress billings should pick up from mid-2QFY24F. As a result of the slight delay in construction works, unbilled sales have already piled up to MYR1.5bn as compared to annual property sales of MYR1.2-1.3bn.

• Maintain TP. Our TP is based on an unchanged 35% discount to our updated RNAV, as well as 2% ESG premium given our ESG score of 3.10 for MCH using our in-house proprietary methodology.

• ESG framework update. As there is now greater focus on the E pillar due to critical climate change issues, we have tweaked our ESG weightage. Henceforth, we assign a weightage of 50% to the E pillar, followed by 25% each to the S and G pillars. Further details are in our 2 May thematic research note titled Envisioning a Better Future.

Source: RHB Research - 12 May 2023