Results

4Q14 core PATAMI declined 31% yoy to RM22.1m, with YTD net profit of RM108.1m making up 93% and 97% of HLIB and consensus estimates respectively.

Deviations

Due to a combination of declining unbilled sales (RM715m or -9.7% qoq) and weaker sales in FY14 (RM504m, representing a 37% yoy decline).

Dividends

2.65 sen DPS was declared in 4Q14, bringing YTD DPS to 4.9 sen, in-line with our 5.0 sen DPS forecast.

Highlights

A weak 4Q to end the year. 4Q14 core PATAMI declined 31.0% yoy to RM22.1m, in tandem with a 26.0% yoy decline in revenue. The weaker revenue was due to a combination of declining unbilled sales as key projects such as Glomac Damansara, Bandar Saujana Utama and Glomac Cyberjaya 2 were near the tail-end of their project lifecycles.

Sales: Weak FY14... Glomac’s sales were impacted by the imposition of cooling measures such as the hike in RPGT and withdrawal of DIBS, which caused weaker FY14 sales (RM504m, -37% yoy). Moreover, Glomac did not launch new phases for Lakeside Residences, as it was fine-tuning the pricing and costing of phases 5-7; GDV has been increased from RM2.34bn to RM2.45bn.

... but look forward to FY15. It is encouraging to note that 4Q14 sales recovered to RM136m (+32% qoq), thanks to strong sales from Saujana Rawang, which made up more than half of 4Q sales. Moreover, Glomac will be reactivating Lakeside Residences with higher selling prices (RM820- 860k for Phases 5-7, vs. RM730k previously). Glomac planes to launch 7 projects with RM1.04bn of GDV in FY15 and is guiding for RM800m sales (Figure #5). Our main concern here is the commercial / high rise segment which makes up circa 50% of the FY15 launches, as the outlook for this segment could continue to be challenging.

Healthy earnings visibility. Unbilled sales now stand at RM715m (1.1x FY14 revenue).

Risks

Slowdown in sales; weaker margins.

Forecasts

FY15-16E forecast reduced by 15-19% to reflect subdued earnings outlook in FY15.

Rating

HOLD

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

Negatives: Lack of liquidity / free float

Valuation

Given GLMC’s unexciting near-term 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 - 19 Jun 2014