MATRIX: Property Developer’s Earnings Exceed Expectations, Driven by Strategic Diversification and Cost Management

A leading property developer has reported financial results for the second quarter and first half of fiscal year 2026 that surpassed market expectations, underpinned by robust sales conversion and strategic project contributions. The investment bank maintains its “BUY” recommendation for the company, setting a target price of MYR1.72.

Performance Review

For the second quarter of FY26, the company recorded significant revenue growth quarter-on-quarter, primarily attributed to increased billings from its Levia Residence project in Cheras and the successful completion of the M333 St Kilda project in Australia. The recent acquisition of Horizon L&L further bolstered revenue with a maiden contribution of MYR33.1 million in the quarter.

Overall property sales remained strong, reaching MYR406.9 million in 2QFY26, an increase from MYR381.5 million in the preceding quarter. First-half FY26 property sales totaled MYR788.4 million, positioning the company well to achieve its full-year target of MYR1.6 billion. Unbilled sales also saw a healthy rise, climbing to MYR1.6 billion from MYR1.49 billion in 1QFY26.

Despite the positive top-line performance, the company’s EBIT margin for 1HFY26 contracted to 26% from 30% in 1HFY25. This was primarily due to a shift in its product mix, with higher contributions from projects outside Negeri Sembilan, and the reclassification of certain expenses. Notably, real estate agent commissions are now accounted for under the cost of sales, a change from previous periods. Net gearing also increased slightly to 0.21x from 0.15x, a consequence of new borrowings undertaken to finance the Horizon L&L acquisition and its subsequent consolidation of borrowings.

Challenges and Operational Adjustments

The healthcare division experienced some softness during the period, largely due to an extended public holiday in September leading to specialist doctors being on leave and postponed surgical procedures. However, the company is actively pursuing capacity expansion for this segment, with completion anticipated by June 2026.

Regarding its M333 project in Australia, while 30 of the 53 remaining unsold units have been rented out, management’s strategy is to sell the remaining units en bloc. Therefore, no further significant revenue contribution from this project is expected until all units are sold.

Future Outlook and Investment Rating

The company aims to achieve a 30% revenue contribution from regions outside Negeri Sembilan, leveraging its increased exposure to the Klang Valley market through the Horizon L&L acquisition. Sales from the MVV City project are expected to be gradually recognized as revenue starting from 4QFY26.

Analysts have maintained their earnings forecasts for the company. The “BUY” recommendation is reiterated with a target price of MYR1.72, representing a 24% upside potential. This valuation is based on a 25% discount to RNAV, with an additional 2% ESG premium factored in, reflecting the company’s strong ESG score of 3.10.