• Maintain BUY and MYR2.66 TP, 13% upside and c.6% yield. Matrix Concepts’ 4QFY22 (Mar) results missed expectations, due mainly to slower construction progress as a result of labour shortage that is affecting many sectors. The company ended FY22 with property sales totalling MYR1.34bn, exceeding the initial target of MYR1.2bn. Also, Matrix announced a 1-for-2 bonus issue. Coupled with the 3.75 sen final dividend (full year 12.5 sen), investors’ interest on this stock should remain strong.

• 4QFY22 results. The industry-wide labour shortage issue has likewise affected Matrix’s construction progress. The quarter also saw the impact of higher administrative and general expenses due to MYR12.04m write-off of certain plant and machinery related to the IBS facility. Meanwhile, other income was inflated by a MYR7.0m reversal of impairment as well as MYR9.0m reversal of overprovision of project cost. Overall profit margin was held up by higher sale of industrial properties in 4Q worth MYR65.6m. Full year 12.5 sen dividend represents a payout of 51%.

• FY22 sales surpassed target. New property sales achieved MYR346.4m vs MYR356.7m in 3QFY22. Full-year sales of MYR1.34bn was 12% higher from MYR1.2bn in FY21. Newly-launched phases in the existing townships remained well-received. Laman Sendayan 5, Bayu Sutera 1 Precinct 2B, and Tiara Sendayan 11 are already 80%, 95% and 100% sold.

• Set the FY23 sales target at MYR1.3bn. In view of the market headwinds, management hopes to repeat at least MYR1.3bn property sales in FY23. Apart from the usual affordable landed products, Matrix will also launch M333 St Kilda project (GDV: AUD80m) this month.

• Bonus issue again. Besides the consistent dividend delivery, we are also upbeat with the newly proposed 1-for-2 bonus issue, which is the fourth bonus issue since listing. The exercise is expected to be completed in 4QCY22.

• Forecasts. We revise down our FY23F-24F earnings slightly by 3-4% in view of the ongoing labour shortage issue. The M Greenvale project in Melbourne, which is already fully sold, will be recognised in 2QFY23 as the development will be completed in July 2022. Unbilled sales remained steady at MYR1.3bn, vs MYR1.27bn as at 4QFY22.

• Maintain TP. Our TP is based on 30% discount to RNAV, as well as 4% ESG premium given our ESG score of 3.20 for Matrix, using our in-house proprietary methodology.

Source: RHB Research - 26 May 2022