Matrix Concepts’ dividend yield remains attractive at 6%

Matrix Concepts Holdings Bhd (May 23, RM2.47)

Maintain buy with an unchanged target price (TP) of RM2.91: We attended Matrix Concepts Holdings Bhd’s briefing and walked away feeling positive. Matrix Concepts decided to cap its dividend payout up to a maximum of 40% compared with a minimum payout of 40% previously. We opine that this is reasonable given the concern about the slowdown in the property industry and preserving cash for potential landbanking opportunities. We conservatively assume a 35% dividend payout compared with the 40% previously in the financial year 2017 (FY17) and FY18, which still translates into a 6% dividend yield, remaining the highest among our coverage.

The take-up rate for Matrix Concept’s ongoing projects remains encouraging. Suriaman phase 1 and 2’s take-up rates have increased from 58% to 73% quarter-on-quarter (q-o-q), while the recently launched Hijayu 3 (pictured) saw an encouraging take-up rate above 51%. Matrix Concepts will be launching phase 3 of Hijayu 3 with a gross development value (GDV) of RM115 million and Suriaman 2B with a GDV of RM154 million in the second quarter of FY16 (2QFY16).

Matrix Concepts will also be launching its maiden project in Melbourne, Australia, with a GDV of A$30 million (RM88.5 million) by end-May 2016. This project comprises 52 units of low-rise apartments with a selling price starting from A$450,000 onwards. We believe this project will be well taken up given its location near Melbourne’s central business district.

Meanwhile, Matrix Concepts’ Kota Gadong Perdana project with a GDV of RM1.4 billion comprising 3,200 units of affordable houses (built-up of 2,000 above) and priced around RM400,000 will only be launched end of this year or early next year. This will help to sustain future sales given its affordable price range.

Overall, Matrix Concepts remains bullish on the prospects of Bandar Seri Sendayan in Seremban and maintains its sales target of RM1 billion in comparison to our estimate of RM800 million.

We think further upside comes from escalating land prices in Seremban as more Greater Kuala Lumpur residents continue to migrate to Seremban, optimism about its land replenishment for Sendayan TechValley 3, and its estimated dividend yield of 6.2% for financial year 2017 which is still attractive.

However, the company’s lack of land bank diversification means the company’s fate is completely tied to that of Seremban.

We maintain “buy” with an unchanged TP of RM2.91 based on the unchanged 20% discount to revalued net asset valuation, while its dividend yield remains attractive at 6%. — Hong Leong Investment Bank Research, May 23

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This article first appeared in The Edge Financial Daily, on May 24, 2016. Subscribe to The Edge Financial Daily here.