RHB says Matrix Concepts has solid balance sheet to help weather headwinds, maintains 'buy' on valuation

TheEdge Fri, Jul 10, 2020 11:40am - 3 years View Original


KUALA LUMPUR (July 10): RHB Research has maintained its “buy” rating for Matrix Concepts Holdings Bhd, with an unchanged target price (TP) of RM2.22.

In a note today, analyst Loong Kok Wen said: “Matrix Concepts’ 4QFY20 results (for the fourth quarter ended March 31, 2020) were in line with our estimates. Just like its peers, management has pared down its sales target for FY21 to RM1 billion (flat year-on-year or y-o-y)."

“We still like the stock as its 40% dividend payout ratio is unchanged, backed by a solid balance sheet (its net gearing is only at 7%). Matrix Concepts is one of the few developers under our coverage that offer a 6% yield,” she added.

Loong said while revenue grew quarter-on-quarter (q-o-q), the operating (earnings before interest and taxes) margin contracted to 20% for 4QFY20, versus 33% for 3QFY20, due to higher contributions from mid-range affordable property projects compared to higher industrial land sales of around RM70 million in the previous quarter.

“Matrix Concepts also recorded an impairment of RM2.9 million for d’Sora Hotel during the quarter. The company’s effective tax rate increased due to non-recognition of deferred tax assets for certain temporary differences and non-tax deductible expenses. A 2.5 sen fourth interim dividend per share (DPS) was declared, bringing its full-year DPS (dividend per share) to 11.5 sen versus 12.8 sen for FY19.”

The RHB analyst noted the company’s new property sales in 4QFY20 amounted to just RM87.3 million, compared with RM280.9 million in 3QFY20. Full-year sales of RM1.04 billion implied a 20% y-o-y decline from FY19’s RM1.3 billion.

“Weak sales in 4QFY20 were largely due to the closure of sales galleries and government offices during the movement control order (MCO) period, so numerous signed sales and purchase agreements could not be sent for stamping.

“Take-up rates saw a mild improvement, with Tiara Sendayan (Precinct 5)'s reaching 88% versus 55% in 3QFY20, while Hijayu Aman (P1)’s was at 83% from 74% in 3QFY20.”

Loong said given the impact of the Covid-19 pandemic, management had set a RM1 billion sales target for FY21 on the back of RM1.04 billion worth of new launches.

Matrix Concepts’ key focus remains the affordable products in Tiara Sendayan and Bandar Seri Impian, as well as affordable-premium residential products like the Hijayu series in the Sendayan development. Property sales in 1QFY21 were likely strong due to the sales backlog during the MCO period, she added.

“We expect FY21 earnings growth to be flat, underpinned by RM1.02 billion in unbilled sales, versus RM1.21 billion as at 3QFY20. Earnings for FY22 will likely decrease y-o-y due to lower property sales expected for this year. As such, we cut our FY22 earnings projection by 13%.”

The research house analyst said its revalued net asset value (RNAV) estimate was updated to reflect the latest financial numbers. Although its TP is unchanged at RM2.22, it is now based on a higher discount to RNAV of 35% (from 30%) to better reflect market risk.

At 10.53am, Matrix Concepts had shed two sen or 1.09% to RM1.81, with a market capitalisation of RM1.53 billion. The stock saw some 426,900 shares traded. 

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