AmInvest Research Reports

GLOMAC - Dragged by Higher Construction Cost

Publish date: Fri, 14 Jun 2024, 10:36 AM
0 9,040
An official blog in I3investor to publish research reports provided by AmInvest research team.

All materials published here are prepared by AmInvest. For latest offers on AmInvest trading products and news, please refer to:

Tel: +603 2036 1800 / +603 2032 2888
Fax: +603 2031 5210

Office Hours
Monday to Thursday: 8:45am – 5:45pm
Friday: 8:45am – 5:00pm
(GMT +08:00 Malaysia)

Investment Highlights

  • We downgrade Glomac to HOLD from BUY with a lower fair value (FV) of RM0.40/share (from RM0.42/share previously) based on a discount of 40% to revised RNAV and neutral ESG rating of 3-star .
  • The FV implies a FY25F PE of 13x, slightly higher than the current average of smaller-cap property stocks.
  • The lower FV stems from the 31% to 37% downward adjustment to FY25F/FY26F core net profit (CNP) after accounting for lower-than-expected CNP margin resulting from higher construction cost for existing projects.
  • Glomac’s FY24 core net profit (CNP) of RM7mil came in below expectations. It was 55% below our earlier FY24 earnings forecast and 53% below street’s.
  • The variance to our forecast was mainly due to lower-than- estimated CNP margin as a result of increased construction cost and finance expense.
  • In FY24, the group’s revenue fell 22% to RM266.7mil while CNP plunged 79% to RM6.6mil. This was mainly attributed to the completion of several property development projects and slower new projects launched in FY23.
  • Meanwhile, FY24 CNP margin fell to 3% from 9% in FY23. This was mainly due to the higher waiver fee to allow the bumi lots in its projects to be disposed to non-bumi buyers. Additionally, Glomac’s CNP margin was impacted by higher construction costs and finance expenses.
  • Glomac secured new sales of RM360mil (+19% YoY) in FY24, attaining 91% of its earlier sales target of RM393mil . The major sales contributor was Lakeside Residence (60%).
  • For FY25F, management is setting a higher sales target of RM414mil-RM432mil (+15% to +20% YoY vs. actual FY24 sales), supported by planned launches of RM425mil .
  • In FY24, the property investment division’s revenue grew 16% while operating profit improved 15%. This was mainly driven by the improvement in the occupancy rate of Glo Damansara mall.
  • QoQ, the group reversed to a core net loss of RM2mil in 4QFY24 from a CNP of RM4mil in 3QFY24 mainly due to lower property development activities as well as increased finance cost and taxation.
  • We believe that Glomac’s FY25F revenue and CNP will be largely supported by its unbilled sales of RM504mil (+45% QoQ), which represents a cover ratio of 1.4x FY25F revenue . We expect the group’s unbilled sales to be replenished with planned launches totaling RM425mil in FY25F.
  • As Glomac is currently trading at an unexciting FY25F PE of 22x vs. a 4-year average of 14x, we see limited upside for the group.

Source: AmInvest Research - 14 Jun 2024

Related Stocks
Market Buzz
Be the first to like this. Showing 0 of 0 comments

Post a Comment