Matrix Concepts Holdings Bhd - Below Expectations
Fri, 28-Feb-2025 07:30 am
by Team Coverage • Apex Research

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MATRIX (5236)

Target Price (RM)

1.350

Recommendation

Hold

Summary

  • MATRIX’s 3QFY25 core net profit at RM43.3m (-24.3% yoy, -35.7% qoq), bringing 9MFY25 core net profit at RM171.4m (-6.8% yoy) came below expectations, accounting to 68.6% and 66.1% of ours and consensus forecast respectively.

  • Earnings sustainability will be supported by progressive recognition of unbilled sales (RM1.42bn) along with total landbank of 3,232-ac that carries a total GDV of RM15.3bn to be develop over the next 12 years.

  • Maintain HOLD recommendation on MATRIX with a lower target price of RM1.35 (based discount rate of 20% to our RNAV) and appraised with three-star ESG rating.

 

Results below expectations. 9MFY25 core net profit at RM171.4m (-6.8% yoy) came below ours/consensus expectations, accounting to 68.6% of our core net profit forecast at RM239.7m and was at 66.1% of consensus forecasted net profit of RM259.2m. Key deviation is due to weaker-than-expected property development segment margins that was impacted by change in product mix as high-rise development, Levia Residences delivered lower margins, along with higher administrative and general expenses. During the quarter, a third interim dividend of 1.35 sen/share, payable on 10 Apr 2025 was declared. 

 

YoY. 3QFY25 core net profit contracted -24.3% yoy to RM43.3m, impacted by the absence of revenue from sales of industrial property in the previous corresponding quarter at RM35.7m and higher finance cost as the Group undertook additional bank borrowings to fund the land acquisition in MVV City. Revenue for the quarter fell -5.1% yoy to RM280.9m. 

 

QoQ. Core net profit slipped -35.7% qoq, on the back of lower contribution from property development segment which negated the better contribution from education segment.

 

Outlook. Launched a total of RM1.16bn worth of GDV in 9MFY25 and will be launching more than a half of projects in Sendayan Developments that carries a collective GDV of RM757.0m in 4QFY25. Booked in new property sales amounting to RM354.3m, bringing 9MFY25 new sales to RM1.02bn (9MFY24 new property sales at RM961.4m). Over the longer-term, MATRIX is equipped with a total landbank of 3,232-ac that carries a total GDV of RM15.3bn that will sustain operations over the next 12 years. We reckon sequential earnings recovery will pick up minor pace in coming quarters, particularly when contribution from Levia Residences hit greater stage of completion along with progressive recognition of unbilled sales amounting to RM1.42bn with unbilled sales amounting to RM1.42bn.

 

Earnings Revision. We cut our earnings forecast by -15.7%/-14.1% for FY25F/FY26F respectively, taking into account of (i) weaker margins stemmed by higher contribution from Levia Residences, (ii) higher finance cost for land acquisition of MVV City and, (iii) higher operational expenses associated with development of MVV City during the initial stage of project launch tentatively in FY26.

 

Valuation. We maintain our HOLD recommendation on MATRIX with a lower target price of RM1.35 (from RM1.38 after recent 1-for-2 ex-bonus issue), based discount rate of 20% to our RNAV and appraised with three-star ESG rating. After appreciating sharply last year, we believe fundamentals and potential growth prospects has mostly priced into their current share price.

 

Risk. Inability to replenish landbank, rising construction cost beyond expectations, changes in housing as well as property regulations and labour shortages.

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