Case Study: The Tale of Two Property Companies

In my previous post, I’ve explained the 4 key criteria to look at when evaluating a property stock. If you have not read it, you can check it out here before reading this post as I’ll be sharing a case study on 2 property stocks comparing side-by-side based on the 4 key criteria explained in my previous article. The 2 property stocks are Tambun Indah Land Bhd (“Tambun”) and Matrix Concepts Holdings Berhad (“Matrix”). So, let’s get to it.



Tambun (KLSE: 5191) was incorporated on 19 March 2008 and listed in the Main board of Bursa Malaysia on 18 January 2011. The company mainly involves in property development, mainly focus in the Mainland Penang. Below is a list of the company’s current on-going development projects:

Tambun's Project Listing

(Source: Company’s Presentation Slides)

Apart from property development, the company also derive its revenue from investment properties such as GEMS International School, Pearl City Malls and Straits Garden Commercial Lots. However, this accounts for 1.7% of Tambun’s total revenue in year 2017.


Matrix (KLSE: 5236), on the other hand, is incorporated in year 1996 and listed in the Main board of Bursa Malaysia on 13 May 2013. The company involves in 4 business segments, namely, property development, construction, education and hospitality. Its flagship projects are mainly located at Negeri Sembilan – Bandar Sri Sendayan (Township) and Sendayan TechValley (Industrial properties). Below is some of Matrix’s current on-going development projects:

Matrix's Project Listing

(Source: Company’s Presentation Slides)

Apart from property development, Matrix also derive approx. 3% of its total revenue from investment properties such as Matrix Global School and Clubhouse.

#1: Asset Quality – Ability to sell at a profit

As a recap, the main issue that causes the slowdown in property market is “Affordability”. The maximum affordable house price for Malaysian is RM300K and below. This have caused some serious mismatch of supply and demand which led to the oversupply of residential properties that are priced at RM500K and above.

Malaysia Housing Property Chart 1

(Source: Housing Watch Website)

So, do Tambun and Matrix has the ability to sell its property at a profit? Most of the properties developed by both companies are priced at RM500K and below. As such, Tambun have reported lower sales in its 4Q 2017 result with unbilled sales shrunk to RM66 mil from RM196.9 mil in 4Q 2016. To make matter worst, Tambun’s revenue have been declining since 2014.

Tambun & Matrix Chart 1

(Source: Company’s Annual Report)

Matrix, on the other hand, has been able to sell its developed properties. In its 3Q 2018 result, unbilled sales have increased to RM1.1 bil as compared to RM0.9 bil in 3Q 2017. According to RHB Research Report, the higher sales growth is contributed by its flagship project, Sendayan TechValley (“STV”), which is an industrial land plots located near one of its other flagship project as well, Bandar Seri Sendayan township.

Bandar Sri Sendayan Map

(Source: Company’s Website)

In my opinion, this is what makes Matrix so unique from Tambun and other property companies. Its STV have attracted many multinational companies such as Hino Motors, Daihatsu Motors, Messier-Bugatti-Dowty, etc. This in turn, increases the value of its township at Bandar Sri Sendayan. Naturally, investors would be attracted to invest in the said township.

Taking into account all the above points discussed, Matrix seems to have a very good asset quality than Tambun.

#2: Solvency – Debt level are not excessive

Tambun & Matrix Chart 2

(Source: Company’s Annual Report)

Looking at the above chart, you’ll notice that Matrix seems to have undertaken more borrowings than Tambun. But this does not mean that it is excessive. If we look at both companies’ net gearing ratio, Tambun has a near zero net gearing while Matrix has a net gearing ratio of 11.8% and it is on a decreasing trend due to the increase in cash and cash equivalents. Judging by this, both have a relatively acceptable debt level.

Tambun & Matrix Chart 3

(Source: Company’s Annual Report)

However, Matrix have been increasing its debt level since its March 2016. In my opinion, this is normal as Matrix has numerous project to be launch in near future. While Tambun have been decreasing its borrowing since year 2015 in line with the current negative property market.

#3: Liquidity – Ability to meet the short-term liabilities

As mentioned in my previous post that property sector is cyclical in nature. As such, property companies must have a stable source of income to tide them through in times of property downturn.

Tambun & Matrix Segmental Result

(Source: Company’s Annual Report)

Based on the above table, Matrix is actually making losses in its investment properties segment (i.e. Education and Hospitality) while Tambun’s investment properties have been generating an increasing profit since year 2015 which is mainly contributed by the opening of GEMS International School on September 2015.

Tambun & Matrix Chart 4

(Source: Company’s Annual Report)

In addition, Tambun has a more stable cash flow from operation as compared with Matrix. One thing to note is that both companies have reduced its capital expenditure in view of the poor property market. In my opinion, Tambun is more liquid than Matrix based on its segmental result and cash flow generation.

#4: Valuation – PB ratio relative to peers

At the time of writing, Tambun is trading at PB ratio of 0.55 times while Matrix trades at PB ratio of 1.34 times. There is a reason why Matrix has a higher PB ratio than Tambun and this is attributed to its unique business model (selling of industrial land to MNCs which increases the value of its township as well) – good asset quality. As for Tambun, a low PB ratio is mainly because of the slowdown in property market which increases its inventory (i.e. property held for sale) due to difficulties in selling them.

Tambun & Matrix Chart 5

(Source: Company’s Annual Report)

Nevertheless, both companies has been paying consistent dividend to the shareholders over the past 4 years despite the negative sentiment in property sector with Tambun having a dividend payout ratio of approx. 40% and Matrix at approx. 45%.

Assuming that both companies will be paying out the same dividend in years to come, the dividend yield for Tambun and Matrix would be 13.42% and 6.52% respectively at the time of writing. However, can both companies sustain its dividend payment in the future? Judging by the 3 criteria discussed above, Matrix seems to be able to sustain its dividend payment of RM0.11 per share as the company have a better asset quality than Tambun but has a lower liquidity. On the other hand, Tambun’s overall performance has been deteriorating.

My Insights

Here’s a summary of all the points discussed above. In terms of asset quality, Matrix is more superior to Tambun. Thanks to its STV which complements its township at Bandar Sri Sendayan. Tambun, on the other hand, is experiencing some trouble in selling its developed properties which resulted in lower unbilled sales.

In terms of liquidity and solvency, Tambun is more liquid given its profitable investment properties which could generate positive cash flow as compared to Matrix investment properties which currently are still loss making. Nevertheless, both have a relatively acceptable debt level but it is a concern if Matrix borrowing continues to increase (currently, it has been increasing since March 2015).

In terms of valuation, Matrix trades at a premium to Tambun. This is fair based on Matrix’s good asset quality despite poor property market currently. However, I prefer to adopt the “wait and see” approach until there is some signs of property market recovery such as growing property sales volume in Malaysia. Just to be conservative. So, I’ve come to the end of my case study and I hope you learned something today.

If you would like to receive more key insights article, do subscribe to this website. You can also check out some of my past articles on REITs or increase your investing knowledge by browsing through my articles on Investing 101.

Thomas Chua
An equity investor and co-founder of Stocks Insights. Prior to this, he was attached with medium-size audit firm for 2 years working as an external auditor where he have performed statutory audit on companies from various industries including oil & gas, retailers, manufacturing, industrial products & machinery, etc. He is also involved in Enterprise Risk Management exercise and the internal control framework review for entities undergoing a listing exercise on Bursa Malaysia and SGX Catalyst Board.

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