Tuesday, 28 October 2014

Matrix Concepts: Sitting tight in Negeri Sembilan

The Seremban-based property developer is a burgeoning property player. A strong performance in its second quarter as well as the recent purchase of a 164-acre piece of land to replenish its land bank led to great optimism among analysts. Yet its share price has been on a downtrend lately.

Business model: Established in 1996, Matrix Concepts Holdings Bhd started off as a property development company in Negeri Sembilan. In 2004, its acquisition of another property developer, Seventech Sdn Bhd, saw Matrix Concepts expanding into Johor. It went public in the same year and subsequently went into joint-venture (JV) with Kemajuan Tanah Negeri Johor Bhd and Menteri Besar Incorporated.
The group was listed on the main market of Bursa Malaysia Securities Berhad on May 28, 2013.
Its primary activities are investment holding, property development and construction. The group has undertaken various township developments in Kluang and Seremban as well as residential and commercial projects in Seremban. Bandar Sri Sendayan in Negeri Sembilan is thus far the group’s largest project and constitutes 79.7% of revenue in 2013.
Others include Sendayan TechValley as well as Taman Sri Impian in Kluang. In 2011, it signed a memorandum of understanding (MoU) with six foreign companies from Japan, Taiwan, Hong Kong and France for the sale of industrial lots at Sendayan TechValley 2 in Negeri Sembilan.
According to the group it has to-date successfully built and sold 22,000 residential and commercial properties with a gross development value (GDV) of RM2.5 billion.
Shareholder and management assessment: The company’s major shareholders include its founder, Lee Tian Hock, who is also managing director and CEO. He currently owns a substantial 19.81% of the company’s shares followed by Shining Term Sdn Bhd which holds 15.93%.
Its non-independent non-executive chairman Mohamad Haslah Mohamad Amin spent 20 years in Maybank Bhd and had previously served various foreign companies namely Peregrine Fixed Income Ltd in Hong Kong, Fleet Boston NA in Singapore as well as Pacific Plywood Holdings Ltd in Hong Kong.
Lee has had 30 years of experience in the property development industry and prior to founding the group, he held various executive positions in several property development companies. He currently leads the group’s business direction and overall strategies and policies.
Matrix Concepts 1 year price performanceShare performance: Matrix Concepts has been trading in a 52-week range of RM1.89 to RM3.32 with an annual return of 62.99% and has far surpassed the FBM KLCI benchmark of 3.04%. However, there has been a slump in the share price since late September when it plunged to RM2.74, an all-time low since experiencing a general uptrend in mid-June.
As at Oct 23, it was trading at RM2.96 up 0.06 sen.
Analyst calls on Matrix Concepts Holdings 231014What analysts think: Analysts are on the whole positive. The group currently registered revenue of RM163.7 million for the second quarter of the financial year ending Dec 31, 2014 (2QFY14) compared to RM147.3 million in last year’s corresponding quarter. Its profit before tax (PBT) for 2QFY14 stands at RM58.6 million compared to last year’s RM40.6million.
Analysts’ optimism stems from the group’s recent purchase of 164 acres of land for RM71.5 million in Sendayan, Negeri Sembilan to replenish its industrial land bank. The pricing of the land is deemed fair to most analysts and is in line with the current market value of RM72 million.
Earnings forecast:

Earnings forecast for Matrix Concepts Holdings 231014

StockStalk: The new land slated for the development of a full facility industrial park called Sendayan TechPark is expected to generate GDV of RM170 million. The purchase has now increased the group’s land bank to a total 1,164 acres.
Given the infrastructure in Sendayan TechValley and its close proximity to Greater Klang Valley, Matrix’s industrial land is highly sought after and there would be ready buyers as noted by RHB.
In addition, the selling price is expected to be RM30-RM35 per square feet (psq), which according to RHB would make Matrix rake in a 50% gross margin by selling the industrial land plot and thus retain the group’s overall margin at 30% to 40%.
The group’s higher presence in Negeri Sembilan which is seen as an increasingly thriving satellite city is a reason to be optimistic. However, the lack of landbank diversification means that the group’s “fate is completely tied to that of Seremban” as observed by HongLeong Group.
It is also important to note that Sendayan TechValley has been quite well received with 760 acres sold to date mostly to multinational corporations from Japan, the UK, Germany, France and China.
The share has been experiencing a general downtrend and trading below analyst’s expectation lately. Investors seem to be lukewarm about the announcement since late September but this could probably be a result of overall poor market sentiment. The FBM KLCI has been trading at a near one-year low.
Most of the group’s properties consist of affordable housing which is continuously backed by government support. Kenanga believes that the group is “well positioned in the affordable housing segment coupled with industrial developments within the Greater Klang Valley region”.
Overall analysts are confident about Matrix Concepts’ ability to deliver a similar 2Q14 performance in subsequent quarters due to strong billings, sales take up rates as well as potential land sales.


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