Thursday 10 October 2013

Matrix Reloaded

Matrix Concepts, a Negeri Sembilan-based property developer established in 1996, was listed in Bursa KLCI on 28th May 2013 with an IPO price of RM2.20. Its share price opened at RM2.70, which was 23% higher than IPO price, and closed at RM2.55 on debut day.

Apart from the flying start in Bursa, Matrix caught investors eyes by giving away a total of 20.5sen (less tax) dividend just 3 months after being listed. After 25% tax, the net dividend will be 15.4sen so far, which is net 7% yield from IPO price of RM2.20, and it has not finished yet.

Matrix is a company which is fundamentally sound. Though its revenue is fluctuating mainly due to land sales of RM294mil in 2011, its profit after tax has been in a steady climb since year 2009, thanks to increasing profit margin.

RM mil Revenue PAT PAT Margin %

FY13Q1 155.6 46.0 29.6

FY13Q2 147.3 30.0 20.3


RM mil Revenue PAT PAT Margin %

2009 204.0 19.1 9.4

2010 195.6 22.0 11.2

2011 624.3 79.9 12.8

2012 456.1 103.5 22.7

1H2013 302.9 76.0 25.1

Matrix's major revenue and profit comes from two joint-ventured townships development - A 5233 acres Bandar Sri Sendayan in Seremban started from 2008 and 900 acres Taman Seri Impian in Kluang started from 2006. Other than these, Matrix also has another 1568 acres of land in Port Dickson, Kluang & Seremban.

At the time of preparing IPO prospectus, Taman Seri Impian has completed 268.3 acres of development, 32.5 acres is on-going and 293.5 acres are for future development. For Bandar Sri Sendayan, only 281.5 acres are completed, while 746.0 acres are on-going and 804.5 acres are for the future. Both are expected to contribute to Matrix's earning until year 2019.

       Bandar Sri Sendayan - Seremban's satellite township

Bandar Sri Sendayan is Matrix's anchor project at the moment, with its land size more than double SP Setia's famous Setia Alam. It comprises residential, commercial & industrial development. Its industrial park Sendayan TechValley has successfully attracted many multinational corporate. French-based aerospace company Messier-Bugatti-Dowty has recently announced its decision to invest here.

       Sendayan TechValley

Matrix's high profit margin is contributed by relatively low land acquisition cost at RM9 psf, sales of high margin industrial land, increasing property price in Seremban, product shift from single to double storey houses and launching more luxury homes etc. The land acquired in Sendayan is even cheaper than what Tambun Indah paid for its Pearl City in Simpang Ampat, Penang.

For the first 6 months of current FY, its revenue from residential/commercial : industrial : land sale stands at 76% : 21% : 3%. Its net profit margin average 25.1% at the same period and is an improvement from FY2012. Its projects achieve almost 96% take-up rate and its on-going GDV and unbilled sales stand at RM1.4bil and RM521.9mil respectively on 1H2013.

Even before listing, Matrix was in a net cash position with cash of RM51.5mil and total borrowing of RM33.9mil (from balance sheet FY13Q1). After listing, its cash jumps to RM211.4mil while borrowings drops to RM24.9mil (from balance sheet FY13Q2).

       Sendayan Merchant Square

After obtaining additional fund from listing, Matrix wasted no time to purchase landbanks. So far it has signed sales & purchase agreement to acquire lands at:
  • Jalan Ipoh Kecil, KL, 1 acre, RM43.6mil (RM950 psf)
  • Rasah, NS, 194.4 acres, RM59.3mil & Labu, NS, 236.9 acres, RM47.5mil (average RM6 psf, both close to its Bandar Sri Sendayan)

Purchase of land in Kuala Lumpur will mark Matrix's first foray into Kuala Lumpur City Center. The land at Jalan Ipoh Kecil is near to Chow Kit and PWTC, where there are LRT & Monorail stations nearby. Matrix plans to launch a mixed development of high-rise service apartment with full facilities in 2014. Its estimated GDV is RM250mil.

Including the recently purchased lands, Matrix now has 2,732 acres of landbanks with an estimated total GDV of RM8.2 billion.

       Sendayan Icon Park

Matrix has a dividend policy that pay at least 40% of profit after tax as dividend. Up to today it has paid 20.5sen less tax (or 15.4sen after tax) as dividend. If we assume Matrix will register RM140mil profit for the whole FY2013 (EPS 47sen), then this is already 33% dividend payout. HLG predicts net 26sen dividend for FY2013, or 35sen less tax, which represent a yield of 9% (at share price of RM2.90) and there is still net 10.6sen to be declared.

At the predicted EPS of 47sen in FY13, Matrix PE ratio will be only 6.2x at recent share price of RM2.90. If we give it a fair PE of 10x, its target price should be RM4.70, which represents a possible 62% upside.

       Hijayu @ Sendayan

We know that current property price has increased a lot for the last 5 years and the household debt is approaching an alarming level. The government is trying hard to suppress property price and reduce household debt. This situation will surely affect property sector negatively in the near future. 

However, for Matrix, it may be a bit different as it mainly focus in Negeri Sembilan and Kluang, which are close to but not within the property hotspots of Klang Valley and Iskandar Malaysia where speculating activity is rampant. Matrix who build only landed residential property currently, may benefit from the spillover effect from these 2 areas.

The purpose of public listing of Matrix listing is for expansion and the management has shown that by immediate landbank purchases. I think Matrix has reloaded its arsenal and may give a good push to be a billion ringgit company soon.

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