KEY INVESTMENT HIGHLIGHTS

• Matrix Concepts results briefing
• Earnings to pick up in 2HFY25
• Higher net gearing post land acquisition
• New sales target maintained at RM1.3b
• Earnings forecast maintained
• Maintain BUY with an unchanged TP of RM2.48

We attended results briefing of Matrix Concepts. We came away the briefing feeling positive on the near-term prospect for Matrix Concepts. Key takeaways from the briefing as below:

Earnings to pick up in 2HFY25. Matrix Concepts recorded lower core net earnings of RM116.6m (-9.4%yoy) in 1HFY25, in line with lower topline (-13%yoy). The weaker earnings were due to lower progress billing of its projects at Bandar Sri Sendayan. We understand that the lower progress billing was due to temporary issue with contractor in relating to construction material at Bayu series projects which has been resolved. Hence, earnings are expected to pick up in 2HFY25. Besides, we expect higher revenue recognition of Levia Residences in Cheras to support earnings growth in 2HFY25.

Higher net gearing post land acquisition. Net gearing of Matrix Concepts increased to 0.09x in 2QFY25 from net cash position in 1QFY25 due to drawdown of borrowings to fund 1,382 acres land acquisition in MVV2.0. Note that the land acquisition was completed in October 2024.

Meanwhile, Matrix Concepts is acquiring 1,000 acres of land in MVV2.0 which is expected to complete in 2HFY26. Management expects net gearing to inch up to 0.3x post-acquisition. Despite the expected higher net gearing, management is prudent in capital management as Matrix Concepts inked land sales of ~RM250m at MVV2.0 which should progressively being recognised from FY26 onwards and improve balance sheet of Matrix Concepts.

New sales target maintained at RM1.3b. Matrix Concepts registered total new sales of RM663m in 1HFY25, on track to meet management new sales target of RM1.39b for FY25. Management expects new sales momentum to be stronger in 2HFY25 as second phase of Levia Residences in Cheras will be launched in 2HFY25. Note that Levia Residences in Cheras is Matrix Concepts' high-rise project in Cheras with total GDV of RM532m. Besides, new sales from Bandar Sri Sendayan should remain stable due to healthy demand for landed properties in Negeri Sembilan.

Maintain BUY with an unchanged TP of RM2.48. Post briefing, we make no changes to our earnings forecast for FY25F/26F/27F. We also maintain our TP for Matrix Concepts at RM2.48, based on 22% discount to RNAV. Long-term prospect for Matrix Concepts is positive with strong earnings visibility from MVV 2.0 land. MVV2.0 with total acreage of 2,382 acres and GDV of RM12b will propel property sales and earnings growth beyond FY27. Besides, the growing earnings contribution from healthcare division will further support earnings growth. Meanwhile, dividend yield of Matrix Concepts remains attractive at 4.6%. Hence, we maintain our BUY call on Matrix Concepts.

RNAV table Source: MIDF Research Stake Est remaining GDV (RM m) WACC (%) Value (RM m) Domestic Sendayan 100% 5,744 10% 492 BSI 100% 1,926 10% 179 Other N.S. 100% 128 10% 14 Klang Valley 100% 1,138 10% 115 MVV land 85% 12,000 10% 808 International Australia 100% 268 10% 32 Indonesia 30% 2,000 10% 63 Unbilled sales 1,200 10% 139 Total 1,843 Shareholder Funds 2,130 Total RNAV 3,973 Number of shares 1,251 RNAV per share 3.18 Discount 22% Target Price 2.48

Source: MIDF Research - 28 Nov 2024