ALLIANCEDBS Research has downgraded its hold call on Matrix Concepts Holdings Bhd (MCH) with a lower target price (TP) of RM1.65, based on a wider 50% discount to revised net asset value (RNAV) from 30% previously.
In a note on April 17, the research house said this is mainly to account for the weakening growth prospects going forward with the structural headwinds in Malaysia’s property market.
“We believe there is limited upside potential in the near- to medium-term despite the company’s healthy fundamentals.
“In view of the persistently weak property market, we cut MCH’s FY21/22 earnings forecast by 18% and 21% respectively, largely due to lower property sales and margins. We have assumed lower sales of RM1 bil and RM1.1 bil for FY21 and FY22 respectively, representing cuts of 15% and 11% respectively,” said the research house.
Over the past few years, MCH has been chalking up strong sales growth momentum despite the challenging environment.
“We believe that this is set to reverse in the near term as MCH has grown to a sizeable property player competing in a stagnating market with declining profitability.
“While MCH has always enjoyed the competitive advantage of low land cost in its flagship Bandar Sri Sendayan (BSS) in Negeri Sembilan and Bandar Seri Impian (BSI) in Johor which has enabled the company to outgrow its peers, we believe it has reached a saturation point,” said the research house.
It added incremental sales are increasingly harder to attain amid the strong headwinds in the market.
The research house noted that MCH’s unbilled sales have been declining in the past few quarters. Its sales replenishment has been affected by the generally tepid market sentiment due to slow economic growth.
In addition, Malaysia experienced an unexpected political upheaval in March followed by an unprecedented six-week movement control order (MCO) by the government in March-April to contain the Covid-19 outbreak.
These factors have further depressed the confidence of consumers and corporates and will directly affect property sales. MCH is unlikely to be spared from this negative shock and its earnings will most probably suffer in upcoming quarters.
At 11.21am today, MCH’s shares were not traded and remain unchanged at RM1.71 from yesterday’s close. — April 17, 2020
