KEY INVESTMENT HIGHLIGHTS

• 1HFY25 earnings within expectations
• Better earnings outlook in 2HFY25
• Stable new sales
• Proposed 1 for 2 bonus issue
• Earnings forecast maintained
• Maintain BUY with a revised TP of RM2.48

1HFY25 earnings within expectations. Matrix Concepts 1HFY25 core net earnings of RM116.6m deemed within expectations, making up 44% of our and consensus full year estimates as we expect higher progress billing in 2HFY25. Matrix Concepts announced dividend of 2.75sen per share for 2QFY25, bringing total dividend to 5.25sen per share.

Better earnings outlook in 2HFY25. Sequentially, 2QFY25 revenue was higher (+14.8%qoq), driven by higher progress billing of its project in Sendayan and Cheras. Nevertheless, 2QFY25 core net income eased to RM55.9m (-7.9%qoq), owing to higher selling and marketing expenses as well as higher finance cost. Note that we have excluded disposal gain of RM11.5m in our core net income calculations. On yearly basis, 2QFY25 core net income was lower (-12.7%yoy), bringing 1HFY25 core net income lower at RM116.6m (-9.4%yoy). The lower earnings in 1HFY25 were mainly due to slower progress billing of its projects and higher administrative and general expenses. Nevertheless, we expect earnings to pick up in 2HFY25 due to revenue recognition of Levia Residences in Cheras. Meanwhile, unbilled sales of RM1.3b provides one year earnings visibility.

Stable new sales. Matrix Concepts registered new property sales of RM341.7m in 2QFY25, higher than new property sales of RM321m in 1QFY25. That brought total new sales to RM663m in 1HFY25, on track to meet management new sales target of RM1.39b for FY25 as it makes up 48% of management sales target. Projects in Bandar Sri Sendayan contributed to 86% to total new sales. Looking ahead, we expect stable new sales from Bandar Sri Sendayan driven by resilient demand for landed properties. Besides, the landbank expansion at MVV2.0 with total acreage of 2,382 acres and GDV of RM12b will propel property sales and earnings growth beyond FY27.

Proposed 1 for 2 bonus issue. On a separate announcement, Matrix Concepts proposed to undertake an issuance of up to 625,673,858 bonus shares on the basis of 1 bonus share for every 2 existing Matrix Concepts shares. The proposed bonus issue is expected to complete by 1QCY2025. We view the bonus issue positively as the bonus issue is to reward shareholders and improve trading liquidity of Matrix Concepts shares.

Maintain BUY with a revised TP of RM2.48. We make no changes to our earnings forecast for FY25F/26F/27F. We revise our TP for Matrix Concepts to RM2.48 from RM2.22 as we narrow our RNAV discount to 22% from 30% in view of the strong earnings visibility from MVV 2.0 land. Groundbreaking of the MVV 2.0 land is scheduled in December 2024 and first property launch on MVV 2.0 land is expected in 2HFY26. Meanwhile, dividend yield of Matrix Concepts remains attractive at 4.7%. Hence, we maintain our BUY call on Matrix Concepts.

Source: MIDF Research - 27 Nov 2024