If there is such a thing as a serial winner, Matrix Concepts Holdings Bhd probably fits the bill. The Seremban-based property developer, which has since 2017 taken home The Edge Billion Ringgit Club (BRC) award for the highest return on equity (ROE) over three years for companies with a market capitalisation not exceeding RM3 billion, did it again for the fifth straight year.
Its adjusted weighted three-year ROE of 17.1% for the period under review is the highest among developers with a market capitalisation of between RM1 billion and RM3 billion. ROE, which is calculated by dividing net income by shareholders’ equity, is considered the return on net assets. Essentially, the ratio measures how effectively management is using a company’s assets to create profits.
The challenge of keeping up the streak is no small feat. Numbers collated based on The Edge BRC’s award methodology shows that Matrix Concepts’ ROE slipped from 19.1% in 2018 to 17.2% in 2019, before skidding further to 16.2% in 2020. Still, its consistent double-digit ROEs over the past few years — well above the industry average of 3% — has certainly not gone unnoticed.
In a research note dated Oct 20, UOB Kay Hian Research estimated that Matrix Concepts’ ROE could maintain at a double-digit level of 13.5% in the financial year ending March 31, 2022 (FY2022), which will be higher than the projected industry average of 5.2%.
Notably, Matrix Concepts has also, for the first time this year, won the BRC award for the highest growth in profit after tax over three years among developers with a market capitalisation of between RM1 billion and RM3 billion.
The group’s net profits have been growing steadily from RM185.3 million in FY2017 to RM213.3 million in FY2018, and increased further to RM218.4 million in FY2019 and RM237.4 million in FY2020. The three-year profit after tax compound annual growth rate (CAGR) of 8.6% helped the company beat other competitors in the category.
Matrix Concepts has gone a long way since its inception in 1996. It launched its maiden project at Taman Bahau in Negeri Sembilan, a mixed residential and commercial development comprising 595 units.
In 2013, it went for listing on the Main Market of Bursa Malaysia. Three years later, the group launched its first overseas project — M Carnegie Boutique Apartment in Melbourne, Australia.
As in previous years, Matrix Concepts’ property development revenue was mainly driven by the recognition of its Sendayan Developments, which accounted for RM924.001 million or 82% of the group’s revenue in FY2021.
As at March 31, total unbilled property sales for the group stood at RM1.02 billion. Ongoing developments stood at RM2.34 billion in gross development value (GDV), while the average take-up rate across all property projects was 78.1%.
Notably, the total potential GDV of its land bank stands at RM9.11 billion. This excludes the GDV for Sendayan Icon Park, which is estimated at over RM6 billion.
In FY2022, Matrix Concepts aims to launch RM1.64 billion worth of properties, which includes launches at Sendayan Developments, Bandar Seri Impian and Australia. New launches include those at Hijayu Residence, which will comprise 183 double-storey homes with a GDV of RM133.6 million, followed by 46 two-storey bungalows at Hijayu Resort Villa with a GDV of RM110 million.
According to UOB Kay Hian research analyst Chloe Tan Jie Ying, Matrix Concepts is an under-appreciated property gem that ticks all the boxes, as the company boasts quality earnings with strong management.
“It is poised to benefit from the economic reopening [and] pent-up demand as it focuses on affordable landed homes. We expect a resilient earnings outlook amid sustainable take-up,” she writes.
Tan opines that Matrix Concepts is attractive as the stock is trading at six times FY2023 price-earnings ratio (PER), offering a 6% yield.
“Its strong value propositions should propel it to trade at a higher multiple. Above average price-to-book value is justifiable with its efficient capital recycling,” she explains. As at Oct 20, UOB Kay Hian has a “buy” call and RM2.50 target price based on a 35% discount to its revised net asset value (RNAV) per share.