Matrix Concepts Holdings Bhd
(March 13, RM2.88)
Maintain buy with a higher target price of RM3.48 from RM3.36: Matrix Concepts announced its acquisition last Thursday of 79 acres (31.97ha) of freehold agricultural land for a total consideration of RM27.5 million. The purchase will be funded internally.

This land, which will be called Sendayan TechValley 3 (STV3), is an extension to STV2, as it is just next to the latter. The land cost of RM8 per sq ft (psf) is attractive in our view.

In September 2014, Matrix acquired 164 acres of industrial land (Sendayan Industrial Park) at RM10 psf. The price is higher as the land has already been granted industrial status. 

Given the cost of RM8 psf for this latest piece of land and management’s estimated infrastructure and conversion cost of RM7 psf, Matrix will be able to retain a 55% to 60% gross margin based on an average selling price of RM40 psf, the going price for plots of industrial land there. 

Minimal infrastructure is needed — as infrastructure works at STV2 have already been completed — and power and water supply connections can easily be made.

We make no changes to our financial year 2015 (FY15) to FY17 earnings forecasts. 

STV3 will be subdivided and sold progressively in the future.

We continue to like the counter, given Matrix Concepts’ exposure to the industrial segment and high dividend yield. 

As we impute the latest acquisition into our revalued net asset value (RNAV), our target price is raised to RM3.48 from RM3.36, based on a 20% discount to its RNAV. 

Matrix is still a “buy”. — RHB Research Institute Sdn Bhd, March 13

This article first appeared in The Edge Financial Daily, on March 16, 2015.