Matrix Concepts 'market perform', AirAsia 'buy'

Matrix Concepts Holdings Bhd

By Kenanga Research

Market Perform (Maintain)

Target price: RM2.65

KENANGA Research is not surprised with Matrix Concepts Holdings Bhd’s proposed acquisition of a 132-acre agriculture land in Port Dickson for RM57mil that has a guided gross development value (GDV) of RM700mil.

It said the freehold land located adjacent to Bandar Sri Sendayang cost RM9.90 per sq ft, which represented a 24% premium compared to their last transacted price of RM8 per sq ft in 2015.

“The premium may have been due to the difficulty in getting every owners’ agreement on pricing as it involved 21 transactions with different landowners.

“We deem that the land acquisition cost is still fair as it implies a land cost to GDV ratio of 10% at the estimated GDV of RM700mil, of which we have also factored in a 20% conversion premium on the acquisition cost of RM57mil,” Kenanga said.

The research house added that Matrix’s net gearing was expected to increase to 0.21 times post acquisition from 0.15 times.

Kenanga also did not change financial year 2018 (FY18) to FY19 earnings’ forecast after the acquisition, as it does not expect development in the area to take place over the next two years.

The firm kept its “market perform” call on Matrix with an unchanged target price of RM2.65.

“While the GDV replenishment of RM700mil is higher than our assumption of RM620mil, it has no material impact on our fully diluted (FD) realisable net asset value (RNAV).

“Our discount factor of 25% applies to its FD RNAV of RM3.52 is the lowest amongst developers under our coverage,” Kenanga noted.

At the current target price, Kenanga said the stock commanded an average FY18 forecast price-to-earnings of 7.4 times, which was higher than small to mid cap developers’ (less than RM3bil market cap) average of 6.8 times.

The stock offered a dividend yield of 5.4%.

AIRASIA BHD

By Maybank Investment Bank Research

Buy

Target Price: RM3.75

AIRASIA’S Q2’17 core net profit is expected to be about RM221mil, a 19% decrease year-on-year, bringing 1H17 net profit to about RM487mil, said Maybank Investment Bank Research.

The research house, which has a “buy” call on the counter, said this would account for 39% of its full-year forecast, which is consistent with the group’s 40:60 1H:2H profit split.

While Malaysia performed strongly, it expected the group to be weighed down by weaker performances in Thailand, India and the Philippines.

“The lower year-on-year profit is expected as 2016 was an exceptional year and we remain confident AirAsia is on-track to meet our FY17 forecast,” it said.

The research house added that AirAsia sweated its assets significantly in Q2’17, with the average number of flights per aircraft day at 6.2x, a 10.7% increase year-on-year and 5.1% increase quarter-on-quarter.

This, it said, will help to reduce operating cost, specifically on the fixed cost components. More impressively, AirAsia was able to deliver this without any noticeable deterioration to its on-time performance.

The research house noted that AirAsia’s share price had been trading range-bound since the company’s AGM on May 25.

“While shareholders’ approval for sale of leasing arm, Asia Aviation Capital (AAC) is at hand, the actual transaction remains in the womb,” it said.

The listing of the Indonesian and Philippine associates has also been pushed back another year to 2018.

“It is difficult to pinpoint when exactly transactions will happen, previous predictions have all not materialised. But, when one transaction does transpire, we expect share price reaction to be swift,” it said.