Matrix is the dominant developer in Seremban and a major beneficiary of the Klang Valley property boom. There are five key reasons why we believe investors should take a closer look at the stock, foremost of which are its forward P/E of 4.5x, 9% net yield and net cash position.
Applying a discount to RNAV of 30-40%, similar to the discount we assign to Hua Yang (another small-cap developer with strong fundamentals) and wider than the 0-20% discount applied to bigger-cap developers, we derive a value of RM4.22-4.92, which implies 56-82% upside to its current share price.
The SP Setia of Negeri Sembilan
Matrix is the leading developer in Negeri Sembilan, with over 2,000 acres of undeveloped landbank located 15-20 minutes from Seremban town centre, the capital of the state. Developments near Seremban have benefited significantly in recent years from spillover demand from Klang Valley proper as they are located near the KL International Airport and roughly an hour’s drive from Kuala Lumpur. Matrix is one of the biggest beneficiaries of the Klang Valley property boom as demand for its residential and industrial properties has ballooned over the past 2-3 years.
Five reasons to take a second look
There are five key reasons to take a closer look at Matrix: 1) Matrix is an undiscovered property stock that can ride the Greater Kuala Lumpur transformation programme wave, 2) it is trading on very attractive valuations, 3) the group is in a net cash position that can fund aggressive landbanking, 4) its flagship township in Seremban has considerable competitive advantages, and 5) the market cap of the stock is not far from the RM1bn threshold that will put it on the radar of many institutional funds.
Steeply undervalued property developer
Matrix reminds us of smaller-cap developers that used to trade at mid single-digit P/Es and near double-digit yields, such as Hua Yang and Tambun Indah. Their share prices have since rallied hard. Investors who missed out on those stocks can get another bite at the opportunity with Matrix.
Publish date: 19/09/13