This article first appeared in The Edge Financial Daily on June 10, 2019

Matrix Concepts Holdings Bhd
(June 7, RM1.98)
Maintain buy with an unchanged target price (TP) of RM2.25: Matrix Concepts Holdings Bhd financial year 2019 (FY19) core profit after tax and minority interests of RM217.6 million came in within expectations, accounting for 105% of Hong Leong Investment Bank and consensus full-year forecasts, respectively. Year-to-date dividend amounted to 12.75 sen per share.

Matrix will be launching its Greenvale project by second half of FY20, with an estimated gross development value (GDV) of A$24 million, commanding around 15% profit after tax margin. The project will consist of 70 residential lots available for sale on its own, spanning over 10 acres (4.047ha). Upon purchasing the plot of land, buyers have the option of using any home builder of their choice including the developer’s partnered home builders (Orbit Homes and Burbank). We note that the estimated GDV has not taken into account the additional profit obtained, should buyers opt to use Matrix’s partnered home builder.

Foreign purchasers in Australia are imposed a 12.5% stamp duty on the purchase price of houses. With regard to the M Greenvale project, however, the “land and house” contracts are separated, allowing foreign buyers to bypass the 12.5% stamp duty charge towards the house price where stamp duty will be imposed only towards the land price (excluding the house price).

Management is expecting to launch projects worth up to RM1.3 billion GDV in FY20 (ex-Australia). The breakdown of the projects is as follows: i) Hijayu Resorts Homes, RM146 million; ii) Hijayu Residence, RM419 million; iii) Hijayu Aman, RM216.6 million; iv) Ara Sendaya, RM39 million; and v) Tiara Sendayan, RM483.2 million. As such, we believe the FY20 sales target of RM1.3 billion to be achievable upon the launch of these projects.

Maintain “buy” with an unchanged TP of RM2.25 based on unchanged 25% discount to revalued net asset valuation of RM3. We continue to like Matrix as it is well-positioned to ride on affordable housing theme within its successful townships with cheap land cost and sustained property sales. This is supported by an attractive dividend yield of 6.5% for FY20 and 7.3% for FY21, being one of the highest in the sector. — Hong Leong Investment Bank Research, June 4