Investment Merits

• An affordable housing player within the Greater Klang Valley area

• Sustainable dividend yields of about 6%

• Potential beneficiary of a high-speed rail link

Company Profile

Matrix Concepts Holdings (Matrix) is a Negeri Sembilan-based developer that currently has 1,903 acres of land with a total portfolio GDV of over MYR9.6bn. The company concentrates mainly on developing residential and commercial properties, as well as the sale of industrial land in Seremban and Kluang areas. Over the years, it has successfully completed projects worth a GDV of MYR4.7bn on about 2,900 acres of land. Given the decent selling prices at its Bandar Sri Sendayan (BSS) township, we view Matrix as an affordable housing player. The company has also recently expanded to Australia to raise its market profile.

Highlights

Resilient sales from the affordable housing segment. Amidst the slowdown in the property market, Matrix is still able to rake in commendable property sales. For 9MFY17 (Mar), the company achieved MYR837m in sales. Hence, full-year sales are likely to exceed the MYR1bn mark. More than 90% of the sales amount was secured from its two township projects, namely BSS and Taman Seri Impian. As Matrix Global Schools in BSS becomes more popular and this township matures, we believe the demand for houses there would continue to pick up.

Pipeline launches in FY17-18. Management has maintained the same sales target of MYR1bn going into FY18. For FY17-18, about MYR1bn worth of new projects is slated for launch. The major ones include Hijayu Resorts Homes Phases 2, 3, 4 and 5 – which comprises semidetached and terrace homes – as well as Ara Sendayan (land in Rasah Kemayan). These developments have GDVs of MYR512m and MYR423m respectively, while the terrace homes at Ara Sendayan would be priced at MYR500,000-600,000 each. Given the location and pricing of these projects, we believe they would be well taken up. Meanwhile, Matrix’s project in Carnegie, Melbourne, is already 75% sold. Note that the firm’s sales target excludes overseas sales.

Attractive landbank locations. We are positive on the long-term prospects of Matrix’s landbank, particularly those located in Seremban/Negeri Sembilan. Currently, the company has about 1,300 acres of land there. Apart from being located next to Sime Darby’s Malaysia Vision Valley project, which has a GDV of about MYR25-30bn, the company’s landbank is also very close to the Kuala Lumpur-Singapore high-speed rail link. The stop in Seremban is said to be near Bandar Ainsdale, which is being developed by Sime Darby. Hence, Matrix should also benefit from this, given its land proximity to this area.

Company Report Card

Latest results. Matrix’s 9MFY17 results were satisfactory. The company achieved MYR837m for its 9M sales. It is also set to surpass the MYR1bn mark for its full-year sales. Management has set the same MYR1bn sales target for FY18.

Balance sheet/cash flow. Matrix’s balance sheet is solid, with a net gearing of 16% as at 9MFY17.

ROE. The company’s ROE has been declining to around 20% now from 30% three years ago. This was largely due to the strong profits and, hence, retained earnings it has accumulated over the years.

Dividend. Matrix has a dividend payout policy of a maximum of 40%. Based on our earnings forecasts, the dividend yield is around 6%. For 9MFY17, the company paid a DPS of 10 sen.

Management. Matrix is currently helmed by group MD and CEO Dato’ Lee Tian Hock, who oversees the company’s business direction and overall strategy. Dato’ Lee has about 30 years of experience in the property development industry, having been involved in the development of Taman Rasah Jaya, which used to be Negeri Sembilan’s largest housing scheme at one time. Matrix’s deputy MD and COO is Mr Ho Kong Soon, who is responsible for the company’s daily operations. He has about 20 years of experience in property development. Besides Dato’ Lee and Mr Ho, another board member who has been crucial to the business is nonindependent non-executive chairman Dato’ Haji Mohamad Haslah.

Recommendation

We value Matrix at MYR2.80, based on a 25% discount to RNAV. The stock is currently trading at only 7x P/E, supported by a dividend yield of 6%.

Source: RHB Securities Research - 5 May 2017