Results

3Q14 core PAT declined 13.8% yoy to RM22.7m, with YTD net profit of RM86m making up 65% and 66% of HLIB and consensus estimates respectively.

Deviations

GLMC saw 13.8% yoy decline in PAT in 3Q, despite a 14.9% yoy rise in revenue. Without a strong leap in 2H earnings, it will be unlikely for GLMC to meet HLIB and consensus forecast for FY04/14.

Dividends

Single-tier interim dividend of 2.25 sen was declared.

Highlights

A weak 3Q. 3Q14 core PAT declined 13.8% yoy to RM22.7m, despite topline rising 14.9% yoy to RM183.7m. This translates into PAT margin erosion from 16.5% in 3Q13 to 12.4% in 3Q14. Management attributes the weaker margin to higher new land conversion premium rates and construction costs.

Declining sales. 3Q sales clock in at RM103m overall, a 27% qoq decrease. GLMC’s sales have been declining since 4Q13, which enjoyed RM283m of new sales. Management concedes the current environment is challenging following the cooling measures such as the hike in RPGT and withdrawal of DIBS.

Deferring launches again. In 2Q14, GLMC toned down its overall FY14 launches from RM1.39bn to RM1.01bn. The group has now further reduced its FY04/14 launches to RM367m, as it has deferred major launches such as Lakeside Residences (RM121m), Glomac Damansara (RM375m) and Saujana KLIA (RM205m).

Healthy earnings visibility. Unbilled sales now stand at RM792m (1.2x FY13 revenue).

Risks

Slowdown in sales; weaker margins.

Forecasts

FY14-15E net profit forecast reduced by 10-12%, as we now forecast RM25m net profit in 4Q. We believe that GLMC’s 4Q14 net profit will be lower than 4Q13 (RM31.2m) due to the deferment of its launches, as well as lower margin from new projects such as Glomac Centro and Reflection Residences.

Rating

HOLD

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

Negatives: Lack of liquidity / free float

Valuation

Given GLMC’s unexciting outlook, 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 - 20 Mar 2014