• Maintain BUY and MYR1.88 TP, 16% upside and c.7% FY25 (Mar) yield.Matrix Concepts’ 2QFY24 results beat expectations. The stronger earningslargely stemmed from a ramp-up in the progress of construction of itsproperty projects, as labour shortage issues were resolved earlier. 1HFY24property sales amounted to MYR616.1m, which puts it on track to meetmanagement’s full-year MYR1.35bn sales target. The strong earningsmomentum and solid balance sheet should provide potential upside fordividend payouts ahead.

• 2QFY24 results review. The QoQ growth in revenue was largely due tothe pick-up in construction works in all residential and commercialdevelopments, as MCH’s labour shortage issues were settled earlier.Projects in Sendayan continued to be the largest revenue contributor(MYR340.5m) during the quarter. Meanwhile, its EBIT margin dropped to24.2% from 26.6% in the previous quarter, mainly from an increase in selling& marketing expenses, as well as a lower-margin product mix – TiaraSendayan 13A/13B, and Irama Sendayan 1. A second interim single-tierDPS of 2.5 sen was declared, representing a payout ratio of 49%.

• Strong property sales momentum. MCH’s 2QFY24 property sales cameup to MYR310.8m, vs MYR305.3m in 1QFY24. Sales for projects launched5-6 months ago improved further, with Hijayu (Resort Villa) Phase 1 andTiara Sendayan 16 (P14C3) now 93%- and 94%-sold (from 57%- and 18%-sold in 1QFY24). Other major launches such as Bayu Sutera 7 (Precinct3B) and Irama Sendayan 2C achieved take-up rates of 63% and 19% -these projects were launched in July and August.

• Over MYR1bn worth of projects in the pipeline. Upcoming launchesworth about MYR1.2bn should drive the company’s property sales in2HFY24. Key projects include Levia Residences in Cheras (GDV:MYR532m), Bayu Sutera 8 (GDV: MYR424m), as well as other smallerphases of its existing township developments in Sendayan.

• Forecasts. We raise our FY24-26 earnings forecasts by 2-5% asconstruction progress is expected to normalise at the current level. Unbilledsales slipped to MYR1.3bn, from MYR1.4bn as at 1QFY23. Note that MCHsold an industrial property for MYR48m in Oct 2023, and this disposal isexpected to bring an estimated gain of about MYR20m.

• Maintain TP. Our TP is based on an unchanged 30% discount to RNAVwith a 2% ESG premium applied to our intrinsic value for the stock, givenour ESG score of 3.1 out of 4 for the company.

Source: RHB Securities Research - 24 Nov 2023