Results 

1QFY15  core  PAT AMI  of  RM20.8m  came  in  below expectations, accounting  for only 18.0% and 17.9% of ours and streets’ estimates, respectively.

Deviations 

Due  to  a  combination  o f  declining  unbilled  sales  (RM630m or  -11.9%  qoq  and  -26.1%  yoy)  and  weaker  sales  in 1QFY15  (RM30m  vs.  RM136m  in  both  4QFY14  and 1QFY14).  

Highlights

1QFY15 recorded a decline in revenue by 34.3% yoy  due to the completion of Glomac Damansara Residences project in FY14  as  well  as  the  current  phases  of  Bandar  Saujana Utama  township  which  are  already  at  the  tail-end.  Despite that,  PBT  only declined by 10% yoy thanks to  costs savings and higher  margins from  Lakeside  Residences.

Modest  sales  of  only  RM30m  during  the  quarter  resulted from  the  deferment  of  selected  launches  in  light  of  cooling measures  imposed  on  property  purchases.  It  expects 1HFY15  sales  performance  to  be  modest  with  stronger sales returning  in 2HFY15.

Glomac has planned launches of RM1.07bn for FY15 (50:50 between  landed  residential  and  high- rise/commercial).  With the  existing  concern  on  the  group’s  high -rise/commercial segment,  the  c ompany  remained  cautiously  optimistic  with satisfactory take up rate of 77%  in Glomac Centro (phase 1) while Centro  V (phase  2) will be launched  in 2HFY15.

In  addition, Glomac Damansara’s  boutique retail mall, GLO Damansara,  is  currently  at  its  final  phase,  targeting  to complete  by  Feb  2015.  It  is  comforting  to  know  that  it  has secured  an  anchor  tenant  with  strong  retail  followers.  With such encouraging demand, Glomac is expecting to have 75 -80%  take- up  upon  opening  in  Jun/July  2015  as  tenants would  need about 6 months for fittings.

On landbank replenishment, we believe Glomac is adopting a  wait-and-see  concept  as  land  prices  are  currently  at  its peak.  Furthermore,  given  its  numerous  new  projects  in  the pipeline  with  r emaining  GDV  of  close  to  RM8bn,  we  are confident that it is able to keep Glomac  occupied for the next few years.

Risks 

• Slowdown  in sales
• Weaker margins.

Forecasts 

FY15- 16E  forecast reduced  by  7- 10% to reflect  lower sales assumptions  partially  offsets  by  wider  margin  assumption from groups’  cost savings  efforts.

Rating  HOLD

• Positives:  Strong  land- banking,  branding  and  execution track record.
• Negatives:  Lack of liquidity / free  float

Valuation 

Post-earnings  revision,  our  TP  is  reduced  to  RM1.11  (from RM1.16)  based  on  unchanged  40%  discount  to  RNAV   or implied CY15 P/E of  7.4x.  Maintain  HOLD  on the stock.

Source: Hong Leong Investment Bank Research - 25 Sep 2014