• Maintain BUY, with new MYR2.15 TP from MYR2.02, 19% upside and c.6% FY25F (Mar) yield. We are upbeat with Matrix Concepts’ new land acquisition. Upon the completion of this transaction, it will have a total of 2,382 acres in Malaysia Vision Valley 2.0 (MVV 2.0), with a potential GDV of MYR12bn. Management has also indicated that about 1,000 acres will be allocated for industrial development, which suits the current market trend given the robust demand from local and foreign manufacturers, logistics as well as data centre players.

• Details of transaction. NS Corporation (NSCorp), which is a state statutory body of Negeri Sembilan, has entered into a sale and purchase agreement with Sime Darby (SIME MK, BUY, TP: MYR3.15) to acquire 1,000-acre of freehold agricultural land in Labu (part of MVV 2.0). At the same time, MCH entered into a Development Rights Agreement (DRA) with NSCorp to jointly develop the land via a JV (85% MCH and 15% NSCorp). MCH shall pay MYR435.6m for the development rights, whereby 10% is upon signing and the balance 90% is within 4.5 months upon the fulfilment of conditions precedent. The company is likely to fund the acquisitions via internal funds as well as new borrowings. The company is currently in a net cash position. Note that NSCorp will help to facilitate state approvals for the project and obtain favourable rates for land conversion.

• Reasonable land cost. The cost for the development right translates to land cost of MYR10 psf. Although this is higher than the 1,382-acre previously bought by MCH in Aug 2022 (at MYR7.64 psf), the price is in line with MCH’s previous transactions for land parcels at the Sendayan area.

• Good development potential for the land. The new land is a contiguous parcel to the 1,382-acre land that was acquired by MCH in Aug 2022 (for MYR460m). We understand that the balance payment for the previous parcel will be fully settled in October this year. It is worth to note that MCH’s land in MVV 2.0 is very near to the proposed KL-Singapore High Speed Rail station in Seremban (under the previous plan). Management’s plan to allocate 1,000 acres (out of the 2,382 acres) for industrial development is opportunistic in our view, given the robust demand for industrial land from many foreign and local manufacturers, logistics companies (given the distance to the airport from Labu) as well as data centre players.

• Maintain earnings. We make no changes to our earnings forecasts as the development for the new land may only start in 3-4 years. Our new TP is based on an unchanged 30% discount to RNAV and 4% ESG premium, factoring in the incremental value from the new land.

Source: RHB Research - 20 Jun 2024