Highlights

We met with the management of Glomac and came away feeling reassured that its core business initiatives remain fundamentally on-track.

Puchong flagship updates. Phase 5 of Lakeside @ Puchong is expected to launch in Dec 2013, and has already achieved nearly 7,000 registrations of interest. The selling price has been raised by a further RM50k from the previous launch for what essentially constitutes the same product specs, with the link houses now commanding RM750-800k per unit.

Glomac Damansara updates. With the residential portion close to completion and handover expected in early 2014, the focus is now on the retail mall portion. To recap, the mall is expected to have 350k sft of NLA and Glomac is looking to dispose at 900-1100 psf. We opine that this is a realistic target given that it is comparable to prime retail assets of other major REITs, as well as its up-market concept which is intended to play a complementary role to Tropicana City Mall. Moreover, we also believe the intended sale stands a good chance of going through, as we gather that Glomac has already commenced negotiations with several interested parties.

Landbanking booster, with recent land acquisitions adding on a further RM2.0bn in future GDV. Saujana Utama 4 (SU4), which is adjoining to its successful Bandar Saujana Utama township, will provide RM800m GDV while its latest Cyberjaya / Putrajaya acquisition, located a mere 3km away from KLIA, is expected to fetch RM1.2bn in new GDV.

Growth angles. Glomac is looking to acquire land bank in Balik Pulau in Penang, but has no plans to develop any townships on Penang mainland. Management also remains lukewarm with regards to IDR as it believes land prices have risen up too rapidly. We also gather that a potential collaboration with PR1MA could be on the cards, given the CEO’s oftquoted opinion that Greater KL remains sorely lacking in the supply of mass-market, affordable housing.

Overall impressions. While we take comfort in the fact that Glomac’s core business initiatives remain ontrack, we believe that its share price remains in need of fresh catalysts. As such, we downgrade to HOLD.

Catalysts

Due to stronger than expected margins for its progress billings.

Risks

Slowdown in sales; hike in stamp duty/RPGT.

Forecasts

Maintained.

Rating

HOLD

Positives: Strong land-banking, branding and execution track record.

Negatives: Lack of liquidity / free float.

Valuation

Maintain TP at RM1.16 (40% discount to RNAV).

Source:Hong Leong Investment Bank Research- 5 Aug 2013