Public Investment Bank initiates ‘outperform’ call on Matrix Concepts on stable earnings, dividends

KUALA LUMPUR (Feb 21): Public Investment Bank has initiated coverage of Negeri Sembilan-based property developer Matrix Concept Holdings Bhd with an “outperform” call, with a target price of RM1.80 translating into an implied price-earnings ratio of 11 times. 

“We like Matrix for its consistent performance in delivering superior margins (averaging an about 51% gross margin for the last five years), and its commitment to paying out at least 50% of its quarterly earnings as dividends (a 5.8% yield in the financial year ended March 21, 2022 or FY2022),” said analyst Tan Siang Hing on Tuesday (Feb 21). 

“We believe the valuation premium (vis-à-vis the sector, which is trading at about 0.4 times price-to-book value) is justifiable, given its stable earnings (and dividends) even at the worst of the pandemic-induced restrictions that affected construction progress and property sales.” 

Assuming steady dividends at about 10 sen annually, the stock provides an attractive dividend yield in excess of 5%, he added. 

Matrix has been consistent in delivering sales performance even as the property market was impacted by various lockdowns, added Tan. 

“This is a strong testament to its ability to adapt, and also speaks of the marketability of its products, especially those in Sendayan Developments (BSS),” said Tan.  

He noted that for the last five years, Matrix’s new property sales averaged about RM1.1 billion per annum, with unbilled sales rising from RM1.1 billion to about RM1.4 billion currently. 

For the first half ended Sept 30, 2022 (1HFY2023), the analysts noted that Matrix’s unbilled sales stood at RM1.4 billion, with RM662 million pre-sales secured, which will underpin its earnings in the following 12 to 15 months. 

“We believe that the group can maintain its sales momentum, with an overall take-up rate of 90.2%.”

“Net margins are also expected to remain stable despite cost pressures and supply chain disruptions,” he added. 

Currently, Matrix has about 2,158 acres of land bank, with an estimated an estimated gross development value (GDV) in excess of RM15 billion, and BSS remains its key revenue driver accounting for more than 80% of total revenue in 1HFY2023. 

BSS is located in Seremban, Negeri Sembilan (6,437 acres), and Taman Seri Impian in Kluang, Johor (1,004 acres).

According to the note, BSS is left with land bank of almost 1,647 acres, with GDV in excess of RM5 billion. 

“Not resting on its laurels, it also in the process of completing a land deal to add another 1,382 acres in Malaysia Vision Valley with potential GDV of RM7 billion,” said Tan, adding that the new land deal is priced at about RM7.64 psf or RM460 million. 

Matrix’s other projects are in Puchong, Damansara Perdana and Cheras. The group also undertakes two projects in Australia — M.Greenvale and M333 St Kilda — and a maiden venture in Indonesia. 

The joint venture with Indonesian Bangun Kosambi Sukses and Nikko Securitas Indonesia, meanwhile, is for a joint development of an Islamic financial district in Jakarta, with an estimated GDV of US$500 million (RM2.22 billion).

Tan added that key risks for the group include rising mortgage rates, unexpected increases in building material prices, and volatile externalities. 

At the time of writing on Tuesday, Matrix’s share price had risen one sen or 0.65% to RM1.55, giving it a market capitalisation of RM1.94 billion.