Matrix Concepts Holdings Bhd – What is the extent of competition from IJM Land in Seremban?

 
Matrix Concepts is confident of sustaining its profitability through the launches of its development projects, and the ongoing sale of development projects which have been launched.


It is planning to launch its Hijayu 1A (Phase 2) and Hijayu 3A development projects in Bandar Sri Sendayan, Seremban, in Q1 and Q2 of FY14.

Matrix Concepts Holdings Berhad is a family-owned property developer with a long track record in Malaysia. It is focusing on developing township projects in Bandar Sri Sendayan in Seremban, Negeri Sembilan. The township, called Bandar Sri Sendayan, is about an hour’s drive from Kuala Lumpur and takes up 5,233 acres.

The company just announced earnings for Q4 FY13:

Revenue: +13 per cent QoQ to RM 144.3 mln (the company did not reveal YoY figures)

Profit: RM 40.7 mln vs N/A (because company listed on Bursa in May 2013)

Cash flow from operations: RM 39.7 mln vs RM 34.6 mln

Dividend: 5 sen per share

Matrix Concept’s revenue for the current quarter mainly came from the sale of residential properties, which make up 96.1 per cent of its total revenue.

The remaining 3.9 per cent of its revenue came from the sale of land.

Based on a quarter-on-quarter basis, Matrix Concept’s revenue increased by 13 per cent to RM 144.3 mln due to higher revenue recognition of the residential properties sold for the Nusari Bayu and Hijayu series residential development projects located in Bandar Sri Sendayan.

The group’s profit before tax also increased by 16 per cent to RM 56.4 mln.

This came from the increase in revenue, especially from the Hijayu 3D development project.
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1. What is the extent of the competition from IJM Land in Seremban?

Besides Matrix Concepts, IJM Land also has a presence in Seremban through its developments in the Seremban 2 township and Seremban Heights.

According to RHB, the successful sale of the Kalista condos in Seremban 2 by IJM Land at end-2013 is a sign of the strong pent-up demand for mid-range housing in the area.

Although Matrix Concepts offers landed properties that are priced about 5 per cent-10 per cent lower (according to RHB) than IJM Land’s condominiums, how much competition is coming from IJM Land?

Is Matrix Concepts developing higher end projects in Bandar Sri Sendayan, which will compete with IJM Land?

2. Does it see a risk of Seremban becoming crowded like Iskandar?

The current situation in the Johor property market is described by Johor Real Estate and Housing Developers Association (Rehda) chairman Koh Moo Hing in The Star as being at risk of being flooded, especially by developers from China.

Competition has become more intense with developers such as China-based Greenland Group and Country Garden Holdings starting projects at Danga Bay.

Is Matrix Concepts assured that it will be the main player in the Seremban area, or does it see new competitors coming into the area as it becomes more developed?

3. Will it diversify its landbank?

Matrix Concepts’ selling point is that it is a developer that is focused mainly on Seremban in Negeri Sembilan. Once considered the backyard of Kuala Lumpur, Seremban might be given city status this year by the state government. Besides that, it is also developing a township in Johor called Seri Impian.
But the lack of diversification in its landbank means its fate is largely tied to that of Seremban.

Does Matrix Concepts see potential competition in the same space?

Will it buy land outside of its presence in Negeri Sembilan and Johor?

4. How much does it expect to pay for land in its new landbanking efforts?

Matrix Concepts is currently on the lookout for industrial land because its Sendayan Tech Valley landbank will only last two to three years.

According to Kenanga Research, the developer has sufficient space to buy up to RM 1 bln of land.

An important factor in looking for new land to buy is its current high gross profit margin.

Its gross profit margin for FY13 is about 47 per cent.

RHB expects Matrix Concepts to sustain a gross margin of around 40 per cent, which is above the sector’s average of 20 per cent-25 per cent.

This is due to the low land cost of RM 3 psf (per square foot) for Bandar Sri Sendayan and RM 9 psf for Sendayan Tech Valley.

Can it still get such prices for industrial land?

5. Is Matrix getting enough companies to fill up the space in Sendayan Tech Valley?

Matrix Concepts is creating more value for its township by attracting more foreign-based high-impact industries into Sendayan Tech Valley, which will help its sale of residences and increase the attractiveness of Bandar Sri Sendayan.

Foreign companies such as Japanese bus and truck manufacturer Hino Motor, aircraft landing gear designer and maker Messier Buggatti-Dowty, and automatic transmission manufacturer Akashi-Kikai have already started operations in Sendayan Tech Valley.

Is Matrix Concepts confident of attracting enough companies to fill up the space in Sendayan Tech Valley?

6. What other services will it take on for Bandar Sri Sendayan?

Matrix Concepts will build and operate in Bandar Sri Sendayan private national primary and secondary schools, and an international school teaching the Cambridge syllabus.

Matrix Global Education recently signed an affiliation agreement with Ellesmere College in England.

Besides that, The Edge reports that Matrix Concepts is operating a clubhouse and a food court.

Is it considering going into building management and owning and operating more service businesses for Bandar Sri Sendayan?

7. What is Matrix Concepts’ track record in operating schools?

8. How will the Singapore-KL rail line affect Seremban?

Malaysian Prime Minister Najib Razak recently met his Singapore counterpart Lee Hsien Loong to discuss plans for a high speed rail linking Singapore and Kuala Lumpur.
They also discussed faster border checks like the possibility of having only one checkpoint for entry into both Singapore and Malaysia.

They have set a date of 2020 for completion, and when the rail line starts operating there will be a greater connection for goods, services and people between the two countries.

According to initial plans, the high-speed rail will connect Singapore with Penang, via Johor, Melaka, Seremban, Kuala Lumpur and Ipoh.

Being a stop along the high-speed rail line would greatly increase the visibility and value of the township.

Also, if the rail line does connect the township in Seremban to Kuala Lumpur, it will negate the one-hour commute to Kuala Lumpur for the town’s residents, thereby making Bandar Sri Sendayan (and competitor IJM Land’s Seremban 2) a lot more attractive to home buyers in Kuala Lumpur.

How is Matrix Concepts strategising around the Singapore-KL high-speed rail line?

9. How will sales be affected by the implementation of the GST next year?

The Malaysian government will be implementing a goods and services tax in April next year.

How will Matrix Concepts deal with the GST?

Will it affect the developer’s profits?

10. Will it continue to operate the schools in Bandar Sri Sendayan?

Will Matrix Concepts continue to operate the schools in Bandar Sri Sendayan, or does it plan to hand them over to an operator?

We have sent these questions to the company to invite them for an on-camera interview, and/or seek their written response.

So far, we have not had a reply (which is why you are seeing this message).― Investor Central

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