10 September 2014

How much industrial land does Matrix Concepts have left for sale?

  10 September 2014


KUALA LUMPUR, Sept 8 — The management of Matrix Concepts Holdings Bhd says it is confident it can sustain its profitability from the sale and launch of current and new development projects.

It is currently focused on its township development projects in Bandar Sri Sendayan in Seremban, Negeri Sembilan, and Taman Seri Impian in Kluang, Johor.

So far, Matrix Concepts has launched its Hijayu 1A Phase 2 and Sendayan MetroPark Shop Phase 2 development projects in Bandar Sri Sendayan, Seremban, Negeri Sembilan.

It has also launched its Impiana Avenue 3 development project in Taman Seri Impian, Kluang, Johor.

It is planning to launch its Hijayu 3A development project in Bandar Sri Sendayan in Q3FY14.

The company just announced earnings for Q1FY14:


Revenue: -13 per cent to RM 134.7 million

Profit: -16 per cent to RM 38.6 million

Cash flow from operations: RM 85.6 million vs RM 9.5 million

Dividend: 5 sen per share vs 13.5 sen per share

The management of Matrix Concepts said the decline in revenue was partly because its Hijayu 1A Phase 1 project has not yet reached a stage of completion that would allow it to recognise revenue.

The decline in revenue also caused a corresponding decrease in its profit for the quarter.

This contrasts with its performance in Q1FY13, when it managed to complete and recognise the revenue attributable from its Nusari Bayu 3 Phase 2 development as well as recognise revenue from its various on-going development projects.

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1. How much industrial land does it have left for sale?

Analysts such as Kenanga wrote in a report in May that Matrix Concepts felt the impact of no land sales for Q1FY14.

Kenanga said Matrix Concepts is selling a small plot of industrial land for RM 5.2 million and is in serious negotiations to sell up to another 75 acres of industrial land, which could fetch more than RM 100 million.

According to the analyst, Matrix Concepts’ has an industrial lot sale target of RM 100 million for the year.

Matrix Concepts sells industrial land in its Sendayan TechValley development to companies interested in setting up in the area.

So far, it has sold land to companies such as Hino Motor, Messier-Buggatti-Dowty and Akashi-Kikai Industry/Daihatsu, bringing over RM 3.1 billion of foreign direct investment to Sendayan TechValley.

It seems Matrix Concepts will easily supersede its target of RM 100 million in industrial land sales.

It sold a total of 220.4 acres of land in Sendayan TechValley in FY13, according to page 30 of its 2013 Annual Report.

On page 25 of its annual report, it said Sendayan TechValley covers 1,000 acres.

How much land does Matrix Concepts have left to sell in Sendayan TechValley?

2. Is there still cheap land to replenish its landbank in Seremban?

Matrix is actively looking to replenish its industrial landbank in Seremban and we gather that they are in the process of locking in acquisitions.

According to Kenanga’s research report back in December 2013, Matrix Concept’s landbanks are largely locked at favourably low prices.

It bought its land in Bandar Sri Sendayan and Taman Seri Impian at an extremely low cost of RM3 per square foot many years ago, before the property boom.

As of December, the broker said the asking price for nearby land in Bandar Sri Sendayan ranges between RM 5.60 and RM 8.00 while land prices around Taman Seri Impian have doubled to around RM 6 per square foot.

Does Matrix still see cheap land in the vicinity of its township in Seremban?

3. What is the profit margin for land sales?

Do industrial land sales carry higher profit margins than its developed residential properties?

4. How much land does it expect to buy in Seremban?

Kenanga wrote in the same research report that there are about 1,000 acres of landbank surrounding Bandar Sri Sendayan which are undeveloped and are largely agricultural in nature.

5. How much longer can it develop in Johor around Taman Seri Impian?

Like Bandar Sri Sendayan, is there a lot of land that can be developed around its Johor township? How much land is there, and how cheap is the land?

6. Will the dividend payout increase after land sales?

Matrix Concepts is currently maintaining its minimum 40 per cent dividend payout policy.

According to Kenanga in a report in May, the broker is of the opinion that the company may reward shareholders with a slightly higher payout of 45 per cent due to its comfortable balance sheet and strong cash flow, and especially when land sales at Sendayan TechValley kick in.

As mentioned above, Matrix Concepts is looking to lock in a minimum of RM 100 million worth of industrial land sales from Sendayan Tech Valley.

Will the company increase its dividend payout after its land sales?

7. How low will it reduce the prices of their houses in Bandar Sri Sendayan?

Hong Leong Investment Bank wrote in a report in July that Matrix Concept’s lowering of prices at its Hijayu 3A Phase 1 has resulted in a strong response for its houses.

93 per cent of its houses were sold within the first two weeks of launch at an average price of RM 420,000 to 430,000.

This is in contrast to the 30 per cent takeup rate for Hijayu 1A, which was priced higher at RM 460,000.

The Hijayu 1A and 3A developments are located in the Bandar Sri Sendayan township.

Hong Leong Investment Bank believes that Matrix Concepts is “adapting well to the challenging market conditions by adopting an astute pricing strategy to address the affordability issue for house buyers”.

According to Matrix Concepts’ investor website, Hijayu 1A Phase 1 will be completed by 2015, and its Hijayu 3A is expected to be completed by 2016.

Will Matrix Concepts adjust the prices of its properties in Hijayu?

And how will this affect its profit margins?

8. What is the dateline for finding a new area to duplicate its success in Seremban?

Now that Matrix Concepts has achieved success with Bandar Sri Sendayan and Sendayan TechValley, it needs to replicate the success elsewhere in Malaysia.

This is because its first township in Johor, Taman Seri Impian, carries fewer commercial properties and has a gross development value of RM 1.34 billion as it does not have an accompanying industrial park like Sendayan TechValley to Bandar Sri Sendayan, which in total have a gross development value of RM 6.63 billion.

Matrix Concepts said in its Q1FY14 presentation slides that to duplicate the success of Sendayan TechValley, it is in the “advanced stage of negotiations for potential lands for industrial property development”.

It is not easy to duplicate its township model in Seremban as it requires a good location, the right price, and cooperation from the government, among other factors.

Although there is no immediate urgency, Chairman Datuk Mohamad Haslah Mohamad Amin said in a report by The New Straits Times that the developer will fully complete its development at Bandar Sri Sendayan by 2022.

But has the management of Matrix Concepts set itself a deadline for finding the next development?

9. When will it venture overseas?

The New Straits Times reported in June that Matrix Concepts’ market capitalisation had hit RM 1.3 billion, just one year after it listed on Bursa in May last year.

It has in effect joined the “Billion Ringgit Club”.

Is Matrix Concepts ambitious enough to replicate its township model overseas, or is it going to focus on the Malaysian market?

We have invited the company (alex@aquilas.com.my, julia@aquilas.com.my) to an on-camera interview, and/or to reply to our questions in writing.

At the time of publication we have not received a reply (which is why you are seeing this message).

We will update this report if we do. — Investor Central

- See more at: http://www.themalaymailonline.com/money/article/investor-central-how-much-industrial-land-does-matrix-concepts-have-left-fo#sthash.tPJhD2eK.dpuf
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