Matrix’s nine-month results in line

Friday 26 Apr 2024

Matrix Concepts Holdings Bhd
(Nov 18, RM2.89)
Maintain outperform with unchanged target price of RM3.48: Matrix Concepts’ core earnings for the first nine months of financial year 2014 ending December (9MFY14) of RM126.1 million was well within our and street expectations, making up 76% of our and 78% of streets’ full-year estimates of RM167.2 million and RM162.5 million respectively.

Sales for the 9M came in below our expectations as Matrix managed to bring in total sales of only RM449.5 million, 56% of our full-year property sales estimates of RM806 million — note that this is inclusive of Sendayan Tech Valley (STV) land sales. The shortfall was mainly due to the lack of land sales from STV for the year owing to timing issues as prospective buyers could have taken a longer approval process on their end to invest in STV.

A second interim dividend of 3.75 sen was declared, which brings 9MFY14 dividends to 11 sen adjusted for bonus issue (3.8% yield). This is considered within expectation as 9MFY14 makes up 66% of our full -year estimates as we are expecting a higher dividend payout in 4QFY14.

Year-on-year, 9M core earnings of RM126.1 million saw an increase of 12% from RM112.2 million, supported by a marginal 4% improvement on its revenue of RM447.3 million coupled with a six percentage point expansion on its earnings before interest, taxes, depreciation and amortisation margins from 45% to 51% as they were able to recognise the billings from its projects like Hijayu 1A (Phase 1 and 2), which further contributed to better margins.

Matrix_theedgemarkets

Quarter-on-quarter, Matrix’s 3Q pre-tax profit remains flattish at RM58.5 million despite 9% lower revenue of RM148.8 million underpinned by lower operating costs, which decreased by 14% to RM90 million. However, its 3Q earnings continued to improve by 6% to RM45.1 million, mainly attributable to a lower effective tax rate of 23% (-5 percentage points) due to a reversal of non-deductible expenses for tax purposes due to an over-provision in the preceding quarter.

We are reiterating our outperform recommendation on Matrix with an unchanged target price of RM3.48 based on our fully diluted realisable net asset value of RM4.35 with an unchanged discount of 20%, despite the softer outlook on the property market as we believe Matrix is well-positioned in the affordable housing segment and industrial developments within the Greater Klang Valley region. Furthermore, its valuation is still cheap, trading at only 7.8 times and 6.8 times FY14E/FY15E price-earnings ratio coupled with decent dividend yields of 5.8% to 6.6%. — Kenanga Research, Nov 18

This article first appeared in The Edge Financial Daily, on November 19, 2014.

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