News

Glomac has disposed an office building in Australia for AUD43.80m (RM133m), via its 45.85% owned associated company, VIP & Glomac Pty Ltd (“VIPG”).

The property is known as 380 Lonsdale Street, and comprises of a 7 split-level carpark with 445 bays and 5,130 sq. meters of office and 324 square meters of retail space. The property has street frontages to both Lonsdale and Little Lonsdale Street.

Currently, the office and retail areas are fully tenanted whilst the carpark is leased to an international car park management company.

Financial impact

The proposed sale is expected to result in a share of profit of associated company of approximately AUD5.30m (RM16m) in FY14. We estimate this will increase our FY14 net profit forecast by 5%, after eliminating the earnings contribution from this property.

Pros / Cons

We are positive on this move as it allows Glomac to monetize its non-core assets outside of Malaysia, and to intensify its focus on as well as divert resources to its core domestic operations.

However, given the modest impact (circa 2 sen addition to book) and non-core nature of the transaction, we make no changes to our RNAV-based TP.

Risks

Slowdown in sales; hike in stamp duty/RPGT.

Forecasts

FY14 net profit forecast raised by 5% to RM158m, as the disposal gain will be offset by the loss in associate income.

Rating

HOLD

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

Negatives: Lack of liquidity / free float

Valuation

We maintain our TP at RM1.16 (discount to RNAV remains at 40%) and our HOLD recommendation on the stock.

Source:Hong Leong Investment Bank Research - 9 Oct 2013