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Friday, April 21, 2017

Matrix Concepts- is it about high dividend yield?

Share Price RM2.55
PE Ratio ending 2017 March 6.4x
Dividend Yield 5.5% and projected to increase to 7.8% after two years.

Why Matrix share?
The dividend yield is 5.5%, relatively high as compare with many other listed companies.
Some may say they are very generous in paying dividend. Well, this is half-truth. No doubt, they are very generous, but their pay-out ratio of about 35% is quote normal. What make them to have the high yield is because of the low PE ratio, only 6.4x.

Low PE ratio is nothing if the company is not growing, but we can draw comfort that the dividend yield is quite high.

I hope nobody will buy shares solely based on dividend yield. If the share price drops 15%, then3 years of dividend only can break-even.

Look at growth. Based on forecast by Hong Leong, Matrix will continue to grow or expand and the PE ratio will drop to 4.5x for financial year March 2019.

According to Uncle K, we should not buy property stock now. The profit that we are seeing “now” is the sales transacted few years. Due to downturn in the property market, sales were really bad for the past two years and it will be reflected in the financial result in the coming quarter or years. I fully agree with him. In fact, some property counters have already reported lower profit and the prices have also reacted accordingly. However, when investors buy shares, they are also not buying for the profit now, or what the public already knew. They are buying for the future. If someone buying property stock, he probably has factored in the drop in profits for the coming quarters and years, and anticipating a rebound in the property market.

Having said that, does Matrix sales or property “booking” drop?  See what Managing director Datuk Lee Tian Hock said recently……

………. For the financial year ended March 31, 2017 (FY17), Matrix Concepts surpassed its sales target of RM850 million by 23.5% to hit RM1.05 billion. For FY18, it aims to achieve RM1 billion in total sales.
“We have only come towards the [third week] of FY18 but we are very confident about hitting our target. We just clocked in RM200 million in sales from the recent launch of the first residential phase at Ara Sendayan,” Lee said.
Matrix Concepts currently has a total land bank of 2,000 acres (809 ha), with 1,500 acres situated in Negeri Sembilan and the remaining 500 acres in Kluang, Johor.
The group’s existing land bank carries a gross development value of RM12 billion and will keep it busy for the next eight to 10 years, Lee said…………..

From what I see, they will be able to match their 2017 result.

One minor development…… Through its subsidiary Matrix IBS Sdn Bhd, Matrix Concepts (80%) has entered into a joint venture (JV) with Nissin Ex. Co. Ltd (12%) and Nihon House Corporation (8%) to set up a manufacturing plant to manufacture prefabricated building materials using the technology of Industrialised Building System (IBS).
The factory will be located at its Sendayan TechValley, Bandar Sri Sendayan with a planned capex of RM30m (excluding the cost of a 12 acre industrial land). The factory is expected to be completed in 3QCY18 and has a production capacity of 700 terrace houses p.a.
According to Hong Leong…….. We are positive on this development as Matrix stands to benefit from the transfer of IBS technology from both the reputable Japan counterparts, potential cost savings, better built quality and improve efficiency.
While the manufacturing plant is currently targeted to fulfil their in-house development, the JV does not rule out the possibility to supply to other housing developers in the longer term when IBS is widely adopted by the industry.

Matrix are recommended buy by both Hong Leong and Kenanga Investment Bank with target price of RM2.89 and RM2.65 respectively.

If they are able to achieve the forecast by Hong Leong, do you think the price will stay at this level when the PE ratio is 4.5x?

Why Matrix is not our cup of tea?

As mentioned earlier, growth is more important than dividend yield. Can they achieve growth?

Risk of prolong downtrend of the property market.

Matrix is a stock that is being researched by some brokers and we may not get any super cheap price.

Low target price by brokers.

If I may sum up, Matrix share price probably may not “fly” 50% or 100%. But it probably may not “dive” also. The reason I post this is because I saw the article about their sales which is quite encouraging, and also the reasonable high dividend yield. I know there are many people who just like high dividend yield stocks. Maybe they really have no time to study so many stocks or news in the stock market and dividend yield has proven to improve their wealth year after year. Some people may be looking for some property stock because they have a feeling that property stock will rebound soon.


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Dollar Cost Averaging and PEGGY Method. Sharing info on cheap (low PE) company with high growth, low Gearing or Net Cash and High Dividend Yield.



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