Saturday, September 28, 2013

Matrix Concepts - Gaining traction with investors

Matrix Concepts -
Price Target: RM3.40 ()
Share price: RM2.93
Gaining traction with investors

Highlights
Share price has gained more than 10% last week, as investors begin to better appreciate MCH’s growth and dividend story, and its net cash position. We now revisit its re-rating catalysts.

Strong earnings visibility, with unbilled sales now standing at RM362m (0.8x FY12 revenue).


Expect margins expansion. MCH’s margins are highly sensitive to product mix, and we expect it to expand with time as MCH sell more high-margin industrial land and double-storey terrace houses. YTD, its gross margin is close to 40% and we expect it to rise with time as its land cost is already fully paid for at RM9psf.

Revaluing the industrial land. Previously our RNAV was conservative as we valued its 200 acres of industrial land plots in Sendayan Tech Valley (STV) at book value (RM9 psf). Now that investors have a better grasp of MCH’s fundamentals, we incorporate this angle into our RNAV estimate.

Room to upgrade. Our RNAV estimate is still conservative as we are only imputing 30% GP margin for FY13-15. YTD, its GP margin has averaged 42%.

Strong property prices in Seremban. The asset class outlook in Seremban continues to be encouraging, with MCH’s double storey terrace houses now fetching RM380k vs. RM300k last year. We believe a large part of this comes from new buyers from Klang Valley, now estimated to make up 40% of MCH’s new sales.

Risks
Slowdown in sales; escalation in construction and raw material costs; downturn in Seremban and Johor.

Forecasts
Unchanged.

Rating
BUY

Positives: Offers great exposure to the thriving satellite town of Seremban and high dividend yield.

Negatives: Lack of landbank diversification means the company’s fate is closely tied to that of Seremban, although we note that the recent maiden land acquisition in Klang Valley will mitigate some concerns.

Valuation
The recent strong share price performance suggests MCH is rapidly gaining traction with investors. After factoring in a revaluation in industrial land in STV, our RNAV and TP are raised by 20% to RM4.58 and RM3.40 respectively, while our 25% discount to RNAV remains unchanged. We maintain our BUY recommendation on the stock.


Source/Extract/Excerpts/来源/转贴/摘录: HLIB Research
Publish date: 24/09/13

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