Matrix Concepts Holdings Bhd
(June 22, RM2.02)
We maintain buy with a higher target price (TP) of RM2.50 from RM2.40: Matrix Concepts Holdings Bhd has bucked the trend with record-high property sales of its two flagship projects, Bandar Sri Sendayan (BSS) in Seremban and Bandar Sri Impian in Kluang despite relatively weak market sentiment.
The majority of its launches are priced below the RM600,000 per unit mark, leveraging on robust demand for affordable homes.
The sales momentum going forward is likely to remain on the uptrend as Matrix Concepts still has a large pipeline of affordable homes which is ready for launch.
BSS remains its jewel in the crown given the low average land cost of RM7 per sq ft (psf), with infrastructure in place, when its affordably priced properties are already selling for about RM200 psf, leading to significantly higher-than-average profit margins.
This unrivalled competitive advantage will make Matrix Concepts the best proxy for pure township developments, which are set to outperform in this challenging market.
Our earnings per share forecast is lower than the consensus, which could be due to our more conservative property sales and margin assumptions.
Timely launches of its projects in the Klang Valley will be critical for boosting its earnings growth.
The new air force training base in the BSS is expected to be completed by end CY18, which will then accommodate an additional population of about 3,000, further improving the vibrancy of the sprawling township.
While Matrix Concepts’ dividend payout policy stands at 40%, a higher payout like the financial year ended March 31, 2018’s 45% could help rerate its share price.
We maintain our “buy” call with a higher TP of RM2.50, based on an unchanged 30% discount to our fully diluted revalued net asset valuation of RM3.56.
Matrix Concepts is currently trading at a bargain of seven times FY19 price-earnings ratio despite sustainable earnings visibility and a decent dividend yield of about 6% for this township developer.
Key risks to our view are rising household debt and softer consumer sentiment that could lead to lower property sales. — AllianceDBS Research, June 22